It is strange that Barnier named smaller banks when they are the ones that are hardest hit by the crisis. Granted the small banks are not helping themselves when they bought aggressively into Credit Default Swaps (CDS) and various other structured product that turned out to be far more riskier than they could handle. They did manage to make good profits for a few years running but ultimately the risk blew up in their faces. However that is not to say that the big/national banks are not at fault.
Ultimately, the Greek situation was caused by fiscal irresponsibility of the Greek Government, and not the action of other European banks. Also, “systemic” big banks did not fare any much better than so called “non-systemic” banks. All of us can remember the big banks requesting for help post 2008 while many of the small banks were left hung and dry as they were not deemed too big to fail. Even recently, JP Morgan’s reported loss of USD 5.8 Billion Â (with more to come) is fresh in our minds. Certainly the small banks are not innocent in this financial fiasco, but the big banks are definitely not without blame and perhaps in some cases the contributor to the problems we are facing today.
Non-systemically important banks are Europeâ€™s â€œrealâ€ problem – and that is why even the smallest bank in the euro zone must be under European Central Bank (ECB) supervision, Michel Barnier, the European Commissioner for Internal Market and Services, told CNBC.
Speaking on Monday at the Ambrosetti Forum, an annual international conference held on the shores of Lake Como in Italy, Barnier rejected German Finance Minister Wolfgang Schaeubleâ€™s view that the ECB should focus only on the euro zoneâ€™s largest banks.
Barnier named U.K. bank Northern Rock, Spainâ€™s Bankia and Franco-Belgian Dexia as â€œnon-systemicâ€ banks that still cause â€œreal problems.â€
â€œThey arenâ€™t systemic banks, and it is they who pose the problems today,â€ he said. â€œTherefore, for a single supervision to be effective and credible, it must have the right to look at each of these situations, in each bank.â€
He added: â€œWe should draw on the lessons from the crisis in order that no financiers, no financial products, no financial sectors, have the right to escape from effective regulations, from an effective supervisory mechanism.â€
Barnier said some regulations, such as consumer protection, would remain the domain of national governments rather than the ECB. â€œIt should not occupy itself with the daily running of the banks from Frankfurtâ€¦ this remains national business.â€
On Wednesday, European Commission President Jose Manuel Barroso will detail the Commissionâ€™s plan to place all 6,000 euro zone banks under the ECB supervision at his annual state of the union address.
Barnier told CNBC that European Union countries which are not members of the euro zone, such as the U.K., will be allowed to place their banking sectors under ECB supervision if they wish.
Via – CNBC