Frankfurt: European Central Bank supervisors should be more transparent in their work, a top German regulator argued on Friday, showing the frictions that dog the new regime to monitor lenders.
Last year, the ECB took over the role of supervising big banks across the 19-country Eurozone, setting it on a collision course with regulators who had previously done the job in countries such as Germany.
On Friday, Andreas Dombret, a member of the Bundesbank’s executive board, criticised the ECB, saying that it had not done enough to spell out how it is assessing banks and setting their capital levels, for instance.
“One point which could be improved is transparency,” Dombret told journalists. “The SSM (Single Supervisory Mechanism) supervisors could disclose more comprehensively the new supervisory concepts and the underlying methods used.” Dombret referred in particular to the process of setting individual capital levels for banks, a procedure to make banks safer. This typically increases their costs and has already caused friction with Italy.
Although the ECB has attempted to explain how it works, the authority is difficult to challenge and it has discretion in demanding changes at banks.
Meanwhile, the ECB’s supervisory chief said in a letter on Friday that the European Central Bank has the power to suspend a bank’s payments to creditors if that institution is about to be resolved or liquidated.
“The ECB could consider making use of such measures ... to temporarily suspend payments to creditors by the bank in question, in anticipation of the start of liquidation or resolution proceedings,” Danièle Nouy, chair of the ECB’s bank supervisory board, said in the letter addressed to a member of the European parliament in response to questions about Greek banks.
