Draghi: ECB bank oversight will revive confidence, lending

Mon Dec 17, 2012 11:37am EST
 
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By Robin Emmott

BRUSSELS (Reuters) - New European Central Bank powers to oversee euro zone banks will help restore confidence in the sector and revive interbank lending, its president, Mario Draghi, said on Monday.

European ministers clinched a deal last week to give the ECB powers to supervise the currency bloc's banks from March 2014, taking the first step in a new phase of integration to help underpin the euro.

"The single supervisory mechanism will contribute to restoring confidence in the banking sector across the euro area. It will help revive interbank lending and cross-border credit flows, with tangible effects for the real economy," Mario Draghi told the European Parliament's Economic and Monetary Affairs Committee.

Bank-to-bank lending has yet to recover from the onset of the global financial crisis in 2007, and many banks rely on the ECB for their liquidity needs while others hoard their cash rather than lend it on.

Although the ECB will only have automatic oversight of around 150 of the bloc's 6,000-odd banks, it will have the authority to intervene in smaller banks if there are signs of trouble.

Germany fought hard to constrain the ECB's scope so that it would not cover its savings banks.

Draghi said: "The national supervisors' role gets bigger as the banks get smaller, but all national supervisors will be subject to the single rulebook as regulated from the center. The ECB will retain power to call in any bank under its domain."

Once ECB supervision is in place, the euro zone's rescue fund - the European Stability Mechanism - will be allowed in principle to recapitalize banks directly.   Continued...

 
European Central Bank (ECB) President Mario Draghi addresses a news conference at the European parliament in Brussels December 17, 2012. REUTERS/Laurent Dubrule