The European Central Bank was granted supervisory powers according to the results of a vote by the European Parliament held this Thursday, Reuters reports. In what many see as a step towards a banking union for the European Union countries, the parliament voted to grant the bank supervisory powers of thousands of banks across Europe.
For the ECB, they will begin the process of assembling the infrastructure to oversee banks, including checking balance sheets and conducting analyses of debts. They will also conduct an asset quality review to determine what the status of holdings of various banks really is. Mario Draghi, the chief of the bank, called the move a “real step forward” for the EU, with the ECB set to assume its responsibilities for monitoring banks in one year.
The steps towards establishing a banking union include forming a single bank supervisor, a single resolution authority, and a single system to guarantee deposits. By the results of today’s vote, the ECB is set to step up to its duties in the first of these roles. Jose Barroso, the president of the European Commission, hailed the move but was quick to point out the need to follow up by establishing a single resolution authority as quickly as possible.
However, some believe that today’s move was a step in the wrong direction. Wolfgang Schaeuble said that determining what happens to crisis banks should be determined on a national level, not by the central bank, with the ECB stepping in only if a consensus on the national level could not be reached. German politicians have further added that they believe the move to be illegal under the current EU treaties, something that the ECB’s lawyers hotly contest.
Meanwhile, Finland also expressed opposition to the plan, with Finnish finance minister Jutta Urpilainen stressing the importance of the authority in charge being as independent as possible. Urpilainen expressed doubts that the potential oversight of the ECB was truly independent in the matter of bank bailouts, further adding that she wished the mandate for the supervisor of European banks to be as narrow as possible.
The matter is especially contentious as bailouts continue throughout Europe. At a conference of finance ministers held in Vilnius, European politicians agreed to another 1.5 billion euro bailout for Cyrpus, a country that has already received 10 billion euros in bailout money earlier this year. Economists have declared that Greece will need at least 10 billion euros to balance its budget in the second half of 2014, and many think that Slovenia is next in line for a bailout, citing the high percentage of bad debts owned by the nation’s banks. Slovenia has denied that they will need aid, and so far has not asked for any.