Union Disunion: ECB to Begin Inspection of Euro-Zone Banks
The European Central Bank is set to begin inspecting the balance sheets of large EU financial institutions, even as disagreement between Brussels and Berlin threatens the bloc's banking union plans.
The European Central Bank is already looking ahead. European leaders recently decided to make the ECB partially responsible for keeping tabs on the health of the Continent's banks. And according to Euro Group head Jeroen Dijsselbloem, the Frankfurt-based institution is taking the job seriously.
The European Union tasked the ECB with keeping an eye on banks in the bloc late last year and preparations have been underway since then. Starting in the autumn of 2014, the central bank of the common currency zone will begin monitoring the euro area's largest financial institutions. Should they be unable to prove their financial health before then, however, unwinding them and shutting them down could be an option.
That, though, has become the most controversial element of the banking union plan. On Wednesday, disagreement flared between the European Commission and Germany over who will have the final say when it comes to restructuring wobbly banks. A proposal by Commissioner Michel Barnier, who is in charge of the financial regulation portfolio on Europe's executive body, called for the Commission to have final decision making powers on which banks get restructured.
Germany, however, is adamantly opposed to that proposal and immediately registered its opposition. German Finance Minister Wolfgang Schäuble said that only national authorities have the power to wind down banks. Anything beyond that would require a change to European Union treaties.
Dijsselbloem too cast doubt on the Commission's plan in his Wednesday interview, saying it was not yet clear who would have the power to close down euro-zone banks that ran into trouble. "It's not completely decided what that authority should look like," he said according to the Guardian, one of the papers that published the interview. "The main thing is it should be effective. You need to be able to decide overnight, over a weekend."
Berlin is particularly concerned about granting Brussels more powers so close to general elections this September. But several other northern European countries have joined Germany in its opposition to the EU plan, too.
Still, Dijsselbloem was at pains on Wednesday to emphasize that most recent decisions had actually placed more onus on the banks, their creditors and customers when it comes to refinancing and preventing a collapse. "First and foremost, it is the banks that bear responsibility," he said. "That is my most important message. We have changed our approach to dealing with ailing banks and who has to pay the bill."
cgh -- with wire reports
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