"We welcome the de Larosière report. It's a mix between vision and pragmatism. But pragmatism has its own drawbacks. The weakest point of the report is the crisis resolution mechanism," Peter Praet, chairman of the the ECB's banking supervision committee, told MEPs and reporters in the European Parliament in Brussels on Monday (2 March).
Under suggestions by the de Larosière group, the committee chaired by Mr Praet should be replaced by a new EU Risk Council (ESRC), a body of national regulators. But there was no suggestion to create a single, EU-wide regulator at this stage.
Speaking in the Parliament, Praet pointed out that the new system called for by de Larosière does not clarify "who will share the burden" in the event of the collapse of an EU cross-border banking group, as has already happened with Belgium's Fortis and Dexia. Moreover, it is not clear that the report's proposal to give supervisors a mandate to address national governments during crises will be followed up on, he pointed out.
The problem arises both in relation to micro-supervision (on single cross-border groups) and to macro-supervision (for macro-economic issues). "If, thanks to the early warning mechanism, the supervisor tells Hungary to take a specific monetary measure, it is not certain that the government will act accordingly," Praet told reporters.
He also expressed concerns regarding the role of the ECB in the day-to-day supervision of multinational banks. The de Larosière report indeed gives ECB experts an observer's role during meetings of ad hoc colleges of supervisors, which are expected to be established by the end of the year for each of Europe's forty or so cross-border financial institutions.
But it remains unclear how freely information on single groups will be collected by ECB watchdogs, who are supposed to complement the role played by national supervisors. Despite welcoming the Bank's new role, Praet wondered whether there will be enough staff to fulfil it and wondered how long it will take the new supervisors to develop comprehensive knowledge of specific financial groups.
Moreover, colleges of supervisors are still not all in place, Praet said. Less than twenty of the forty are in operation today, and these only meet a few times a year. "Are ECB men going to act on their own outside colleges?," he asked.
