Jean-Claude Trichet, European Central Bank president, said on Wednesday that he “stood ready” to take on European bank supervision responsibilities and pointed out that granting the ECB the necessary legal powers would be relatively easy.
The ECB president’s comments in the European parliament were the strongest indication yet that he sees a beefed-up role for the eurozone’s monetary authority as necessary to help prevent future financial market crises.
However, Mr Trichet emphasised that the ECB’s 22-strong governing council had not yet agreed a position on the future of European Union bank supervision – a remark that suggested disagreement remains among its members, which include the central bank governors of the 16 eurozone countries. Mr Trichet said: “As far as I am concerned personally, I stand ready.”
National regulatory authorities, including in Germany, have been sceptical about ceding supervisory powers to the ECB.
Weaknesses in EU bank supervision have been exposed during the turmoil of the past 18 months, with the ECB complaining about poor information exchange in the current fragmented system.
Increasing financial integration has also strengthened the case for greater centralisation. Some 45 large cross-border finance groups in the EU account for 70 per cent of bank assets.
Mr Trichet pointed out that the EU’s Maastricht treaty, which paved the way for the launch of the euro in 1999, contained a clause that would allow politicians to grant the ECB powers to act as a bank supervisor. That would be the “great advantage” of taking such a step, he said.
Mr Trichet told the parliament that the financial crisis required a comprehensive response. “We need to reform everything, leave no stone unturned,” he said.
He flatly dismissed the idea that countries might leave the eurozone as a result of the economic crisis. Financial markets have become more concerned after the recent credit rating downgrades of Greece and Spain.
Mr Trichet said, however, that the intensification of the crisis had highlighted the importance of governments adhering to EU fiscal rules, which set limits on government borrowing and debt levels, and of avoiding steps that further undermined economic confidence. He hoped finance ministers and the European Commission would exert “peer pressure” on weaker performing countries.
Mr Trichet said the crisis had heightened the importance of addressing supervision issues “in a comprehensive and co-ordinated manner, both globally and at the European level”.
Separately, the ECB president said he saw, at present, “no threat” of deflation in the eurozone.