Industryweek 14745 Euro Bank Control

Euro Bank Control

July 13, 2012

Political/Economic/Emotional stability encourages investment and the growth of business, which in turn provides jobs and prosperity for people.  The Eurozone, the 17-nation currency bloc, is moving closer to providing that stability via a significant improvement in the Eurozone banking system.  The EU Commission has taken definitive steps toward the establishment of a pan-European bank supervisor who will control the 25 largest banks in Europe.  The supervisor will also have authority over the individual national bank regulators who have direct authority over the smaller banks.

Stronger unity in the financial community is the key to a successful EU.  Constancy in regulations, operations, reserves and procedures will allow businesses around the world to have more confidence in the European finance community.  It will also allow funds to flow freely and for the southern nations to compete with their northern brethren. 

The new FDIC-like entity will operate under the control of the European Central Bank (ECB) and thus at least be partially removed from political pressures, but operating with the authority of the European Commission. The assumed objectivity of the ECB should lead to dispassionate decisions that will benefit all member nations, not just a select few.

Perhaps most importantly, Germany favors the creation of the office of banking supervisor.  They have long wanted increased discipline in the banking industry and it looks like they will get it.  German support is key to the establishment of the new office and the new office is key to European financial survival and eventual success.  It looks like Germany will get what they want; financial discipline, austerity, and accountability.  They are also likely to subtly increase their political control over the EU.  This last point makes some Europeans uneasy, but they are out of options and must take the offered hand and worry about the consequences later.

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