The Banking Union game is in full swing. Until now confined to national skirmishes, it is today virtually launched into the arena by the proposal of the German "5 wise men", the committee of experts on economic matters which assists Berlin in making burning decisions. And that of unified surveillance, as it has explained Stefano Micossi on FIRSTonline, is one of these, there are many political implications in the decision to cede sovereignty in the financial sphere. Give her boxes stuffed with non-performing loans, to Italian banks weighed down by devalued sovereign bonds, ending up with a patchwork of landesbanken e Sparkasse Germany, local political interests and national fears are woven into an almost inextricable skein: how to remedy the original sin of Monetary Union, i.e. having shared a common currency without prior alienation of sovereignty?
The proposal of the "Committee of 5", published on Voxeurepresents an important contribution. Not only to kick off the match, but also because it contains significant elements and even an opening from Berlin. For the avoidance of doubt, given the centrality of the Bundestag it would be naïve to think that the project represents an already acquired point of convergence, but the trust that the 5 essays have in their homeland suggests that this, in fact, can still be considered even today the quasi-official position of Angela Merkel and of Parliament.
And it is certainly not a question of roses and flowers for the "debtor countries". Indeed, the document is seasoned with tones that highlight how little trust the virtuous Central Europe has in the "semi-periphery". The only concession (regarding the number of banks to be supervised), in fact, is punctually compensated by a highly preventive regulatory framework, which "locks down" the nascent "Banking Union" in the name of contrasting moral hazard and loose regulation .
From a temporal point of view, the Committee proposes to complete the Union by 2019, same year as the requirements of Basel III will come into full force. The journey would be divided into three phases main. In the first, the changes to the treaty and the legal framework would adapt, in the second case the institutes would have to apply, according to a predetermined categorization, to obtain the license European Union, subject to verification of entry requirements. The third phase would launch the real banking union, with regulatory and supervisory power at European level and a resolution-recapitalization mechanism for institutions.
SUPERVISORY AUTHORITY
He would be responsible for all institutions in the eurozone (whose participation in the mechanism would be mandatory), but also of those in countries outside the monetary union who wish to join it. This is a significant opening, given that until now, Paris in particular aimed at "totalizing" surveillance. There are those who argue that the French request was driven by the chauvinist will of aiming too high to maintain the status quo, centralizing the surveillance of over six thousand banks with the aim of bureaucratizing and curbing procedures. The authority would still be external to the ECB, to prevent Frankfurt from being weakened in monetary policy decisions and induced to use it to recapitalize institutions or compensate account holders in cases of resolution. And in order not to congest the ECB, certain functions would be delegated to the central banks of the Eurosystem. The adoption of this scheme would require changes to the Treaty (in particular Article 127 of the TFEU).
RESOLUTION AUTHORITY
It would be the "armed wing" of surveillance, financed through a levy charged to the banks to avoid the use of general taxation (by socializing the losses of institutions). In case the resources guaranteed by the tax are not sufficient, the ESM it could make its firepower available, but only on condition that precise rules on the repayment of these funds are defined ex-ante.
DEPOSIT INSURANCE
The 5 wise men warmly advise not to introduce any common guarantee for now, but to align the various national funds by introducing risk-weighted insurance premiums. All to avoid the creation of a "spoil" that encourages banks to risky behavior in the absence of centralized control functions, which need time to be ratified and come into operation.
CAPITAL REQUIREMENTS
In addition to the Basel III capital requirements, institutions should also comply with a “minimum leverage ratio of 5%, including both on and off-balance sheet assets.” As for the perverse contagion of sovereign risk on banks' balance sheets, policies should be put in place that discourage credit institutions from excessive exposure to government bonds. A practice caused, according to the 5 essays, by the attribution of risk coefficients equal to zero to the government bonds of the European region.
