Published October 13, 2012
TOKYO – The European Central Bank's supervision of euro zone banks is likely to become operational only in 2014, even if a decision to set it up comes into force from the start of 2013, ECB President Mario Draghi said on Saturday.
"It is very important that the ... regulation enters into force on January 1, 2013, but that does not mean that the supervision will be in place from January 1 from an operational point of view," Draghi told a news conference on the sidelines of the semi-annual meetings of the International Monetary Fund and the World Bank.
"It is very important that we have this institutional step done by January 1, so we can prepare ourselves to run the supervision and make it operational, but this may well take another year. We think that by January 2014 the new framework will be in place and operational," he said.
Euro zone countries want the ECB to take over the supervision of the region's banks to tighten oversight and prevent future crises in the financial sector.
Problems in the banking sector forced Ireland and Spain to ask for emergency euro zone loans to cover financial institution losses, weakening public finances and undermining confidence in the single currency.
Once the ECB is able to effectively supervise banks, the euro zone bailout fund, the European Stability Mechanism, will be able to directly recapitalise banks, breaking the link between banks and sovereigns.
But there is disagreement on how quickly the ECB supervision can become effective and if the central bank should supervise all euro zone banks or just the big ones.
(Reporting by Jan Strupczewski; Editing by Tim Ahmann)