European Central Bank to Gain control of 6,000 banks in Euro zone

By LUIS MIRANDA | THE REAL AGENDA | AUGUST 20, 2012

The European Central Bank will “supervise” 6,000 banks in the euro area, including savings banks and regional German public banks, but the degree of direct supervision may vary depending on the banks and the involvement of other regulators.

The German newspaper Handelsblatt reported in its Friday edition that sources from the European Commission (EC), the European Union’s executive, wants the ECB to gain supervision of euro zone banks and not only those included in the European Stability Mechanism (ESM), the EC confirmed today.

With the proposal, the EC faces the German Government, as Chancellor Angela Merkel said the EU summit in late June that it is only necessary that the ECB monitor the 25 largest banks in the euro area, that is the ones considered to be in the ESM system.

Community spokesman Internal Market and Financial Services, Stefaan De Rynck, said today that the EC is still working on the proposal, which will be presented around September 11, but that a single monitoring system should apply the common rules consistently throughout the Union Bank and all financial actors. This is the bankers attempt to turn a supposed financial rescue into a financial power grab, as it was detailed in the memo of understanding (MoU).

“We have seen in the past that systemic risks can arise from banks that are not mentioned much in the media and suddenly become systemic, so it is difficult to define what is a large bank, which is a systemic bank, so we have to ensure that the union bank supervisory system to be able to cover all the banks,” he said.

However, De Rynck said it remains to be seen how this principle is articulated with respect to the types of banks and all institutions of the euro zone. What is clear is that the European Banking Authority (EBA) will have a key role alongside the ECB to play in safeguarding the unity and coherence of the single market, he added.

A European official said today that evidently supervisors have the necessary human resources to engage in this system and said it also left open the possibility that the mechanism will get to countries that are not part of the euro zone. The new supervisory tasks will have to be approved unanimously by the 27 member countries in the case of the ECB and by qualified majority in the EBA.

The same source pointed out that, obviously, to talk about “all banks” also includes savings banks and regional public banks.

A Request from De Guindos

The economy minister Spain has been one of the most outspoken politicians who is pushing for a complete surrender of sovereignty to the European bankers. He believes that the European Central Bank’s intervention must be strong and without limit in order to bring about relief to the pressure exercised by the sovereign debt that all European nations are faced with. De Guindos thinks that more centralized power could be the solution to this crisis, even though the current banking policies created by central banking institutions are ones responsible for the current crisis.

The Spanish Minister of Economy and Competitiveness Luis de Guindos, said that the intervention of European Central Bank (ECB) to ease market pressure on Spanish debt must be strong and that there should not be a set limit to amounts or durations.

In an interview with Reuters, the minister has indicated that such interventions “can not be put limit or can not be explicitly explained; not in the amounts of money that will be used not in the length of time the intervention will take” to not detract the effectiveness of the aid which aims to dispel doubts about the euro zone. That is exactly what needs to be avoided. Giving the banks a blank check without limitations for action or time frame is all they want and need to carry out their agenda further.

Regarding the way in which the monies received by Spain and how they will be used, De Guindos explained that these decisions will be made by the finance ministers of the euro countries and the EU in a meeting to be held in the second week of September. He said that by then the Governing Council of the ECB will have to explain how it plans to run the program to buy debt in the secondary market.

Countries in trouble with sovereign debt expect that the ECB will act on the secondary market,where investors already exchange issued debt by buying short-term bonds and without exercising its role as a preferred creditor, which would drive away the other investors and raise the risk premium.

The interventions of the ECB “should not make explicit neither the amount nor a time limit and as noted by the ECB itself, it must take into account the problems caused by the preferred creditor status”, said an European source. In his opinion, the attitude of the ECB has opened “a very positive scenario” for the Spanish government, as the entity recognized the pressure on Spanish debt markets largely responding to something that goes “beyond the domestic politics ” and has seen fit to intervene to correct it.

By this statement, most European nations expect the ECB and the EU to intervene in every way possible, whenever it is necessary, instead of them looking for a domestic solution, which is how the debt problem could be solved more easily, by simply rejecting the payment of debt created by the banks on behalf of the Euro zone countries, which is what has turned the debt problem into a ticking bomb. Iceland did it and it is now enjoying a less painful recovery. Greece and Spain did not have the guts to face the bankers and reject their fraud, so they still suffer the consequences of working along the rubber barons of financial fraud.