ECB risks conflicts of interests over bank supervision powers

BRUSSELS: The European Central Bank risks conflicts of interests over its bank supervision powers when it uses the same staff to perform monetary and supervisory functions, EU auditors said on Friday. They also cautioned about ECB’s excessive reliance on national supervisors, and said the bank had not provided it with all the information they needed. The warnings came in the first report the European Court of Auditors published as part of its mandate to oversee the ECB’s “operational efficiency.” Following the 2007-08 global financial crisis, the ECB has added to its monetary policy functions the task of supervising the top banks of the euro zone’s 19 countries.

The two functions should remain separate, but auditors said the ECB has set up some departments, called “shared services”, which provide support to both the monetary and supervisory tasks. “This saves on resources, but the risk of possible conflicts of interests in some areas needs to be addressed,” the EU auditors said in a note.

The ECB defended the practice, replied in a note to the report: “The establishment of so-called shared services (..) does not lead to conflicts of interests and is therefore compatible with the principle of separation.” Auditors said also the ECB relies too much on staff from national authorities to carry out bank supervision, and this may reduce its effectiveness.