Econintesect: There are reports tonight that the European Commission (Brussels) is drawing up a plan that would remove all banking control from indiviual countries and install the ECB (European Central Bank in Frankfurt) as the regulator of banking in the Eurozone. The 17 countries would lose sovereign control over the financial sector; the European monetary union would be monetarily complete, although, nominally, they would each retain fiscal sovereignty. How long fiscal sovereignty would have any meaning after the centralization of banking control is in question.
The Financial Times report contains this:
Under the proposal, ultimate authority would pass to a new ECB “supervisory board” separate from the ECB’s existing governing council. Although its make-up is still being debated, the leading plan would create a 23-member board: a national representative from each eurozone country plus six independent members, including its chair and vice-chair.
This firewall is apparently going to be an attempt to keep the new bank supervisory function isolated from the existing monetary activities that afford monetary service (loans, ect.) to struggling banks.
About 6,000 banks in the 17 eurozone countries will be covered under the proposed new supervision, bit Reuters says that the 10 EU (European Union) countries not in the Eurozone can voluntarily join the the regulatory group.
Is the union of 17 fiscally sovereign nations in the Eurozone about to discover the Golden Rule?*
*The Golden Rule: He who has the gold makes the rules.
Germany, as well as the ECB itself, have had positions in favor of decentralizing banking regulation, so vigorous debate over this proposal is expected.
- EZB soll alle Banken in der Euro-Zone überwachen (Von Cerstin Gammelin, Süddeutsche, 30 August 2012 – In German)
- Brussels pushes for wide ECB powers (Peter Spiegel, Financial Times, 30 August 2012)
- Update 1 – ECB to oversee all euro zone banks (Reuters, 30 August 2012)