Euro Zone Banking Supervisor Needed

After the banking scandals that have hit the headlines as well as the poor state of Banks in Spain and Italy needing guarantees before their bailout, the European Commission has declared that there is a need for a Banking Supervisor. This would be the first step to decouple the sovereign guarantees from the banking bailouts.

Direct recapitalization of euro zone banks will not require sovereign guarantees as soon as the bloc has established a new banking supervisory body, the European Commission said on Monday.
A senior euro zone official said on Friday that sovereign guarantees could only be dropped “in the very distant future.
“I would like to clarify that there will be no need for sovereign guarantees for banks being directly recapitalized by the ESM,” said Commission spokesman Simon O’Connor, referring to the bloc’s permanent rescue fund.
“The ESM will be able to decide by a regular decision once the single supervisory mechanism is in place to adopt an instrument that would allow for the direct recapitalization of banks.”
A bank supervisor could be operational sometime next year.

Mario Draghi, the head of the ECB made additional comments this morning and he called himself “a little more confident than most summit commentators”. Mr Dragui commented on a future banking union being an achievable goal. Although he was mostly positive on the newly proposed Banking Supervisor, he did mention that the ECB must retain monetary policy independence.

via Yahoo Finance

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