BRUSSELS (MNI) – The following is the fourth part of a text
published by the European Commission, which answers a number of
questions regarding its proposal for a centralised Eurozone banking
supervisor:

How would the ECB be able to deal with the proposed new tasks: would
they get more staff and budget?

National supervisory authorities would carry out most of the
preparation and implementation of the ECB’s supervisory decisions. The
ECB will have to build up the necessary resources to ensure
decision-making and overall coordination of the Single Supervisory
Mechanism. Those resources should be obtained in a way that ensures the
ECB’s independence from undue influences by national competent
authorities and market participants, and separation between monetary
policy and supervisory tasks.

The costs of supervision should be borne by the banks which are
subject to it. The expenditure relating to the performance of the
supervisory tasks will therefore be financed primarily by fees levied by
the ECB on the credit institutions subject to its supervision, and will
be based on the size and the risks posed by these institutions.

Why should the ECB’s supervisory tasks be carried out in operational
separation from its monetary policy tasks?

Within the ECB an operational separation between monetary policy
tasks and supervisory tasks is necessary to eliminate potential
conflicts of interest between these two tasks. Conflicts of interest
could for instance emerge in a situation where in order to meet the
monetary policy objective of price stability, interest rates need to be
raised, while this might at the same time have adverse effects on the
solvency and profitability of the banking sector.

Therefore, the proposal lays down a number of organisational
principles to ensure a clear separation between monetary policy and
supervision while at the same time allowing the ECB to take full
advantage of the synergies between monetary policy and supervision.

To implement the necessary separation between both tasks and ensure
appropriate attention to supervisory tasks, the ECB will ensure that all
preparatory and executing activities within the ECB will be carried out
by bodies and administrative divisions separated from those responsible
for monetary policy. To this end a supervisory board will be set up that
will prepare decisions on supervisory matters. The Governing Council
will be ultimately responsible for taking decisions but may decide to
delegate certain tasks or decision-making power to the supervisory
board. The supervisory board will be led by a Chair and a Vice-Chair
elected by the ECB Governing Council and composed in, addition to them,
of four representatives of the ECB and of one representative of each
national central bank or other national competent authority.

What will the impact of the SSM on the relationship between home and
host supervisors of banks active in several Euro area Member States?

Today, day-to-day supervision of cross-border banks is carried out
by national supervisors. Under EU law the home supervisor and the host
supervisors of other Member States where the bank establishes branches
or subsidiaries or provides cross-border services have to coordinate
their action. One important forum for coordination is the colleges of
supervisors bringing together all supervisors responsible for
subsidiaries in a banking group.

With the creation of the SSM, many supervisory tasks in the euro
area Member States will be carried out by the ECB for all Member States
concerned.

Nevertheless, existing home/host supervisor coordination procedures
and colleges of supervisors will continue to exist as they do today, as
far as coordination with supervisors in non-euro area Member States is
concerned. Non-euro area Member States will retain all their existing
powers and prerogatives. However, to the extent that the ECB has taken
over supervisory tasks, it will carry out the functions of the home
supervisor for euro area banks and the host supervisor for other banks
active within the euro area. The obligations to cooperate in
consolidated supervision and between home and host supervisors, to
exchange information and to coordinate within colleges will apply fully
to the ECB. Colleges of supervisors will be the forum for coordination
between the ECB and national supervisors of non-euro area Member States.

For coordination within the Eurozone, the new arrangements within
the SSM will substitute the complex interaction between home and host
country authorities and within colleges. The ECB will exercise at the
same time the powers of the former home supervisor and the former host
supervisor. Both will be represented on the ECB supervisory board and
will therefore have a voice over the exercise of all those powers. The
SSM will be free to set up internal coordination groups dealing with the
supervision of specific cross-border banks and involving the relevant
national supervisors.

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