Monday, November 21, 2016

ECB Supervises TBTF Banks? Really?

So we all thought the 120+ banks in EU countries which were directly supervised by the ECB were safe in the sense that their supervision was shielded from national interests and/or pressures? Well, think again!

The European Court of Auditors (ECA) has published a report on the new EU banking supervisory system which was established in 2014. The system identified 120+ banks which were deemed too-big-too-fail and which, therefore, has to be taken away from national banking supervision systems and transferred to the ECB. Much to my surprise, I now read the following paragraph in the auditors' report:

"ECB staff led only 12% of on-site inspections of these banks, and overall the inspection teams were predominantly staffed (92%) by the national competent authorities. Similarly, off-site supervision is heavily dependent on staff appointed by the Member State authorities, with the ECB having little effective say over the composition and skills of joint off-site supervisory teams."

Perhaps this is too short a time to pass judgment but somewhere along the line the expectation has got to be that 100% of inspection teams are led by ECB staffs!


  1. What does it matter? There's still no common European deposit guarantee. The banks shall be bailed in/ bailed out by sovereigns, so it may as well be sovereign authorities that supervise them. Germany just delays the inevitable by not conceding to such a scheme, as eventually the Eurozone will either have to break up or adopt such pool-sharing measures. We're nearing the end game now, as Renzi's government is about to collapse and Le Pen is waiting around the corner.

  2. Who cares about a collapsing eurozone anymore?

  3. Greek Budget Execution in Jan-October.

  4. When Merkel came to office in 2005, it was during the honeymoon phase of the post-Cold War world, when the Germans were lending large amounts of money to European countries that couldn’t pay it back so that they would buy German goods. Russia was weak and a shadow of the Soviet Union; Germany and France were deliberately tied at the hip more closely than ever to avert the disastrous consequences of Franco-German rivalry in the late 19th and early 20th centuries. The money was rolling.

    The year 2008 changed all that. The economic crisis that eventually brought Greece to the brink of exiting the EU represented a fundamental challenge to the structure that kept Germany in its powerful position. Greece could not be allowed to leave, and yet Merkel did not want to set a precedent whereby Germany would accept bailing out the various European states. So she earned another of her many nicknames – the “Queen of Austerity” from a Greek paper – and averted the crisis of the EU only to bring back memories of previous times in history when Germany dictated unfavorable terms to European states. The current spat between Rome and Brussels over banking regulations and budget deficits has similar undertones.

    When the refugee crisis began in earnest in 2015, Merkel moved with a similar decisiveness, throwing Germany’s borders open and expecting EU neighbors to do the same. She harshly condemned those who had no desire to turn over border controls to directives from Brussels. Whether this was because she viewed such a move as a cleansing of German guilt for past crimes, or due to a certain hubris Germany had developed because of its economic success over the years, Merkel miscalculated in that moment, believing that if Germany should say “Jump,” all the EU countries would ask, “How high?”

  5. Here comes the truth. German public sector employees are far more corrupt than their Greek counterparts.

  6. Great news from the incompetent eurozone:

    "Sources in Rome say the Italian government may have to turn to the European Stability Mechanism for a bank rescue, a humiliating and painful course that must be approved by the German Bundestag. It would amount to a partial “Troika”administration under terms dictated by the EU.

    One senior Italian banker said: “We think the banks will have to raise €40bn in fresh capital. This is going to need an ESM bail-out. The problems in the banks are becoming an excuse to put Italy under an EU programme.

    “It won’t happen under Renzi because he won’t be there any longer after a ‘No’ vote. What we expect is a technocrat government that pushes this through.”