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Title :Chinese walls within the ECB after the establishment of the single supervisory mechanism
Creator :Kontogiannis, Alexis
Contributor :Gortsos, Christos (Επιβλέπων καθηγητής)
Athens University of Economics and Business, Department of Business Administration (Degree granting institution)
Athens University of Economics and Business, Department of Marketing and Communication (Degree granting institution)
Type :Text
Extent :69p.
Language :en
Abstract :The object of this diplomatic is the ''Chinese walls within the ECB after the establishment of the single supervisory mechanism''. Initially there will be a presentation of the ECB and the SSM and then an observation to the nexus between monetary policy and banking supervision on the euro – area, as well as the interaction between these two functions and the conflicts of interests that may arise. Moreover, we will focus on the important issue of the rationale for the separation of the above functions and the absolute necessity for the creation of “ Chinese walls”. European Central Bank - ECB is the central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed in Germany in June 1998 and works with the other national banks of each of the EU members to formulate monetary policy that helps maintain price stability in the European Union. The first step towards creatingthe ECB was the decision, taken in 1988, to build an Economic and Monetary Union: free capital movements within Europe, a common monetary authority and a single monetary policy across the euro area countries. The Euro-system is responsible for: defining and implementing monetary policy, conducting foreign exchange operations, holding and managing the euro area’s foreign currency reserves and promoting the smooth operation of payment systems. The ECB carries out specific tasks in the areas of banking supervision, banknotes, statistics, macro-prudential policy and financial stability as well as international and European cooperation. The operational framework of the Euro-system consists of the following set of instruments: open market operations, standing facilities and minimum reserve requirements for credit institutions. In addition, since 2009 the ECB has implemented several non-standard monetary policy measures, i.e. asset purchase programs, to complement the regular operations of the Euro-system. The Single Supervisory Mechanism (SSM) is the mechanism which has granted the European Central Bank (ECB) a supervisory role to monitor the financial stability of banks based in participating states, starting from 4 November 2014. Eurozone states are obliged to participate, while Member states of the European Union outside the euro-zone can voluntarily participate. As of 3 November 2014, none of the non-euro-zone member states had opted to join, although the ECB reported that some of them had expressed an interest in joining, and that talks were being held with each of them to map which changes to national legislation need to be adopted in order to become a SSM member. The SSM is the first established part of the EU banking union, and will function in conjunction to the Single Resolution Mechanism. A first limit to the scope of the SSM is geographical: the SSM will only cover a part of the EU member states. It will hence contribute to what is known as multi-speed Europe. A second limit is the fact that the SSM only deals with bank supervision. Supervision of the rest of the financial sector (for example insurance firms) remains a national competence. In addition, some aspects of bank supervision (for example consumer protection) remain a task for national supervisors. The 19 euro-zone member states participate automatically in the SSM. The last country to join was Lithuania, when it joined the euro-zone on 1 January 2015. Since the EU treaties onlygive the ECB jurisdiction over euro-zone states, legally it cannot enforce measures in non-eurozone states. This would prevent the ECB from effectively carrying out its supervisory role in these states. Under the European Treaties, non-euro-zone countries do not have the right to vote in the ECB's Governing Council and in return are not bound by the ECB's decisions. Non-eurozone countries cannot become full members of the SSM in the sense of having the same rights and obligations as euro-zone SSM members. However, non-euro-zone EU member states can enter into a "close cooperation agreement" with the ECB. The banks in that country are then supervised by the ECB and the country gains a seat in the ECB's Supervisory Board. It would allow banks in that country to be supervised by the ECB provided that they have mechanisms in place to make ECB measures binding upon national authorities. A "close cooperation" agreementcan be ended by the ECB or by the participating non-euro-zone member state. Participating noneuro- zone states will also gain a seat on the ECB's Supervisory Board.The procedure for non-euro-zone states to join SSM through "close cooperation", regulating the timing and content of applications and how the ECB shall assess such applications and the practicalities of admitting new members, was outlined by Decision ECB/2014/510. The decision entered into force on 27 February 2014. As of 3 November 2014, no requests to enter into "close cooperation" have been notified in line with the prescribed procedure. Nonetheless, the ECB has received informal expressions of interest from some none-euro-zone Member States, and is currently organizing bilateral meetings with them with a view to their possible entry into close cooperation arrangements.
Subject :European Central Bank (ECB)
Chinese walls
Banking supervision
Monetary policy
Single Supervisory Mechanism (SSM)
Date :2016
Licence :

File: Kontogiannis_2016.pdf

Type: application/pdf