Poland not against banking union: Rostowski
Poland is not against a banking union but wants the details to be sorted out first, Jacek Rostowski tells Emerging Markets
The eurozone banking union that has recently been proposed by the European Commission is not acceptable for Poland, but this does not mean the country is against any banking union, finance minister Jacek Rostowski said in an interview.
The Commissions proposal includes transferring extensive prudential supervisory powers to the European Central Bank (ECB) from January for banks in the euro area who may receive financial assistance from the eurozones permanent bailout fund, the European Stability Mechanism (ESM).
The supervision would then extend from July next year to include systemically important banks and, from 2014, to all banks.
A supervisory board would be set up at the ECB to separate its supervisory power from its monetary policy mandate and there would be changes to the European Banking Authoritys (EBA) governance structure.
Rostowski said the eurozone needs a proper banking union in order to be fixed and that as with all things of this kind, everything is in the details.
The proposal that has been made public by the European Commission is very unappetizing for anyone who thinks about joining the banking union, he said.
Countries that are not in the eurozone, if they joined the banking union, would be bound by the decisions of the single supervisory mechanism, in other words by the decisions of the ECB, but would have no say in it. This is not terribly appetizing and clearly not acceptable in any way, Rostowski added.
EBA VERY IMPORTANT
Another problem, the Polish finance minister said, is the treatment of the EBA, which was created at the end of 2010 and came into force in January 2011 with broad powers such as strengthening international supervisory coordination, promoting supervisory convergence and providing advice to the EU institutions on banking issues as well as guaranteeing a level playing field.
|More from emergingmarkets.org|
|ECB launches bond-buying programme|
|Positive news for CEE: Erste Bank CEO|
|Ruble, zloty benefit from Fed's QE3|
He pointed out that voting procedures within the EBA had been created to ensure a fair balance between the votes of the countries that are the homes of the banking groups and those who are the hosts.
We can't have a situation in which suddenly we would have the European Banking Authority in which the ECB, as the single supervisory mechanism, as the institution implementing the single supervisory mechanism, could come to the EBA and lay 17 votes on the table, Rostowski said.
The Commissions proposal stipulates that the voting arrangements within the EBA will be adapted to ensure EBA decision-making structures continue to be balanced and effective reflecting the positions of the competent authorities of Member States participating in the single supervisory mechanism and those which do not, and thereby preserving fully the integrity of the single market.
The ECB will be charged with authorizing credit institutions, ensuring banks compliance with the minimum capital requirements, conducting supervision on a consolidated basis and in relation to financial conglomerates. The central bank will also ensure compliance with provisions on leverage and liquidity.
We have to have symmetry between the rights of the ECB and the rights and obligations of all other supervisors within the wider European Union, Rostowski said. So what we need is a reform of the EBA which will ensure that the EBA's mediation is binding, effective and impartial.
The Commission said its proposal gave democratic legitimacy to the ECB as it ensured it was accountable to the European Parliament and to the European Council, but Rostowski said this was not enough and that accountability of the supervisor to national parliaments of member countries may be needed.
If we don't have that, then you can imagine a situation where the ECB is the single supervisor five, ten years down the line and makes a major mistake, the sort of mistake that happened in Ireland or to some extent in Spain and burdens the taxpayers of one or more member states with massive fiscal costs, he said.
What would be the political consequences of that kind of mistake? What would be the consequences in terms of the legitimacy of the supervisory mechanism and, even more importantly, the legitimacy of the ECB as a whole if, say, a mistake by the ECB imposed a cost of 30% of GDP on France, or Holland, or Germany?You can imagine that this would be the beginning of a second, massive, eurozone crisis which would be not only economic but also political. So we think that the supervisory mechanism has to be devised in such a way that the supervisor is properly, democratically accountable, Rostowski said.