A motive to start this website is the realization that important aspects and implications of the most important financial integration project since the single currency area was created are not fully aired and not adequately discussed.: The Single Supervisory Mechanism (SSM) at the European Central Bank (ECB) and the wider banking union that would include a European Framework for Bank Recovery and Resolution and (at a later stage) a European Deposit Guaranty Framework.
Here some examples.
The EU Council, the EU Commission – with the help of the European Parliament- are moving to transfer the powers of a Single Supervisory Mechanism (SSM) to the European Central Bank (ECB) on the basis of Subsection 6 of Article 127 of the Treaty on the Functioning of the European Union, (the Lissabon Treaty, which amended Subsection 5 of Article 205 of the Maastricht Treaty) in the full knowledge, according to some, that this Article was not intended as a legal basis for the transfer of banking supervision in the euro area to the ECB. All leading legal authorities in the German speaking member countries of European Monetary Union (EMU) and even the EU Council´s legal service have taken the position that this Article cannot be used as legal foundation for SSM and Banking Union.
Why did EU leaders and the EU Commission totally ignore the expert advice given in the mandated Larosie`re Report not to transfer bank supervision to the ECB? How can EU policymakers be trusted by the citizens and market participants if they embark on probably the most radical change in Europe´s financial supervision framework at one Brussels summit while totally ignoring –and not even discussing – the advice of independent high-level experts they themselves mandated to come with reform options?
Why didn´t Eurozone legislators or the media raise the Larosiere report urgent warning that because of the conflict of interests in monetary policy and bank supervision “the ECB should not become responsible for the supervision of financial institutions”. Ignoring – and not even discussing – these well reasoned recommendations illuminates the measure of short-term political expediency and the callous disregard for expert advice that has been a hallmark of EU crisis management at the highest level since the Greek sovereign debt crisis exploded in April 2010.
Much of the political economic and technical discussion on banking union issues is dominated by market participants with short term commercial interests. The discussion is dominated and mostly transported by Anglo-Saxon media channels. The news flow and analysis on banking union is forcefully pushed by those powerful EU institutions – like the EU Commission, the ECB and the European Parliament – that are gaining new powers and controls through SSM and Banking Union and by the Club Med debtor countries interests pushing for more debt mutualisation from Germany as Europe´s economically and financially strongest economy.
Germany´s political elite is hiding the banking union risks, especially that taxpayers will be exposed to new dimensions of debt mutualisation through bank restructuring and deposit insurance channels.
Jens Weidmann, the president of the Bundesbank is correct when he warns that “a primary goal of a banking union cannot be the sharing of risk” and “financial transfers should be made transparent and not hidden under the cloak of a banking union” and when he stresses the importance of getting banking union right and takes a long-term view of how it should be implemented. “The creation of a banking union is a case of major institutional work in progress and is, in essence a matter of much the same complexity as setting up a monetary union”….that while it will certainly take less than the whole decade needed for the EMU it is a project not to be rushed”.
The agreement reached on establishing a Single Supervisory Mechanism (SSM) at the ECB by the Council (ECOFIN) in December 2012 is seen by many insiders as proof that Germany has lost control over the banking union process pushed by powerful Club Med interests, by France that always wanted to give bank supervision to the ECB, by smaller member countries like Netherlands, Belgium, Austria and Luxembourg with too large fragile banks that need ECB protection fast, and by a power grabbing ECB under the leadership of Mario Draghi that is acting above EU law and Eurosystem regulations.
By giving away long defended positions in the EU institutional power equation, Europe´s strongest economy with the largest financial system will be controlled by an ECB supervision structure under a “one country, one vote” scheme – something that Americans, Britons and other sovereign nations probably feel bordering on national self-destruction. After the German Bundesbank lost effective control over monetary policy on the ECB Governing Council, Germany is now giving away control over large parts of its banking system – without any assessment of the future fiscal costs of this EU integration move – getting in return the horror-prospect of mass conflict of interest in political deal making – this time not on the Brussel´s stage – but at the supranational ECB level on the Frankfurt stage.