ECB takes over the supervision: Financial crisis forced eurozone countries to change rules for banks
Abstract
Last week, the first pillar of the banking union was launched, when the European Central Bank started to supervise banks in the Eurozone. It will guard 120 most important banks, which together represents around 85 percent of the all asset volume in the Eurozone.
Supervision of the rest of the banks will be left to current national regulators in the individual Member States. However, the ECB will newly have the final say even there.
Why all this? Financial crisis uncovered that the current European banking system in the frame of the monetary union represents a serious problem. It showed how easily financial contagion can pour from one country to another and threaten stability of the euro.
If, furthermore, each state favours its own interests when solving the troubles, not looking at the damage it can cause by that to neighbouring countries, it can potentially make the whole situation worse as a consequence of it.