EP key to banking supervision - ECB official
By Sarah Collins | Wednesday 18 July 2012
A new eurozone banking supervisor will need to be kept in check by the European Parliament to safeguard “democratic legitimacy,” one of the European Central Bank’s top officials has said. Jörg Asmussen, who is responsible for international and European relations on the bank’s six-member Executive Board, said, on 17 July, that national parliaments would also have to be granted more power before any further steps towards budgetary integration are taken.
“Supervision by nature is not independent because at the very end one has to deal with taxpayers’ money,” he told an audience at an event organised by the European Policy Centre (EPC) think tank. “Supervision has to be accountable to a parliament,” he said. “The logical counterpart to exercise this democratic control for European banking supervision is the European Parliament.”
EU leaders endorsed a ten-year plan to strengthen banking, budgetary, economic and political ties in the eurozone at a June summit. The plan refers to the possibility of making the ECB the eurozone’s new bank supervisor, based on Article 127.6 of the Treaty on the Functioning of the EU, which allows leaders to confer “specific” supervisory tasks on the bank. The ECB has insisted that any supervisory tasks it takes on be hived off from its main aim of controlling inflation (or “maintaining price stability”). Asmussen said an ECB supervisor could be brought under scrutiny in regular hearings of Parliament’s Committee on Economic Affairs (ECON), possibly “in euro area composition,” to make sure this was clear. He also said national central banks should continue to have a role in supervising banks within their jurisdictions.
Asmussen said the European Parliament could have control over a future European finance ministry, which he said could be built on the European Stability Mechanism (ESM), the eurozone’s future rescue fund, “The starting point could be the ESM - that is, by nature, by definition, a fiscal authority of the euro area countries,” he said. “Then one could shift the democratic control of the ESM to the European Parliament or to a sub-part of the European Parliament.” Asmussen said a central budgetary authority should have the “competence to limit countries’ ability to issue debt and have intervention rights into national budgets, and to compel member states to correct their policies”.
According to Asmussen, national parliaments should be given more decision making powers before budgetary integration proceeds any further. He said the European Commission could present its recommendations for budgetary and economic reforms directly in national parliaments to give them “ownership” over the decisions. “Whatever we do as further integrative steps, we need to strengthen democratic legitimacy,” he said. “Domestic parliamentary debate and political decision making needs to internalise what it means to be part of monetary union,” he said.
He said further integration was “clearly the route to higher prosperity” and added that it was part of the central banks’ role to define where the eurozone was going over the next decade. “If we cannot answer the question ‘Where do we want to stay ten years from now with the monetary union’, if we cannot answer this, no one is buying a ten-year bond from euro area countries, and if no one is buying a ten-year bond, this is clearly something, then we have a problem, which concerns very much a central bank,” he said. He added that there was nothing to fear from a two-speed Europe, which was natural given the closer ties between members of the single currency. “We shouldn’t fear a multi-speed Europe - it’s already a reality,” he said.
Article 127(6) TFEU
“The Council, acting by means of regulations in accordance with a special legislative procedure, may unanimously, and after consulting the European Parliament and the European Central Bank, confer specific tasks upon the European Central Bank concerning policies relating to the prudential supervision of credit institutions and other financial institutions with the exception of insurance undertakings.”