ECB risks con­flicts of in­ter­ests over bank su­per­vi­sion pow­ers

Kuwait Times - - BUSINESS -

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.

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