VIENNA (MNI) – Strong banking supervision is necessary for
central banks to be able to meet their price stability mandates,
European Central Bank Executive Board member Joerg Asmussen said Monday.

Asmussen said that given the central bank’s interest in financial
stability, it was “sensible” for the ECB to play a role in banking
supervision. He said the European Commission’s proposals on banking
union take “very closely” into account concerns about keeping monetary
policy separate from banking supervision.

“What is clear is that monetary policy can only work properly in a
stable and functioning banking system,” Asmussen said in prepared
remarks at a banking conference. “If banking supervision does not ensure
stability, this makes the job of a central bank to ensure price
stability harder.”

Asmussen said the ECB expects to have “operational independence” in
carrying out its banking supervision mandate, but also acknowledged that
taking on the role will mean submitting to “much closer” control by the
European Parliament than is the case with monetary policy.

Asmussen also reiterated that effective supervision will require
the ECB to have widespread intervention powers in banks. He also backed
the proposal for the ECB to begin with systemically relevant
institutions but “eventually” include all banks.

A financial market union all by itself cannot resolve the crisis,
he observed. Even if optimally constructed, such a union “could not see
to it that the Greek budget gets balanced again, or that Portugal’s
competitiveness increases,” he argued.

Europe must either perfect the integration of the Eurozone by
sharing sovereignty in financial market, economic and budget
policymaking with Brussels, he said, or decide on “the other path, a
decentralized Europe.”

The latter, he warned, would mean risking “the great economic gains
that monetary union and the internal market have brought us.”

It is thus preferable to complete the union, he concluded. Doing
this properly is “indispensable for the functioning of Economic and
Monetary Union and for the future of a stable euro,” he affirmed.

In other comments, Asmussen conceded that it is “no longer
contemporary” for all 23 members of the ECB Governing Council to be
male, but asserted that the debate about gender diversity “should not be
conducted on the back of Yves Mersch.”

(Governing Council member Mersch, who heads the Luxembourg Central
Bank, has seen his appointment to the Executive Board blocked by EU
Parliament because of concerns about the Board’s gender balance.)

“It would be good for the ECB Executive Board in the current,
difficult situation if we were quickly complete again and someone with a
clear orientation to stability like Yves Mersch would be a big help to
us with his understanding of the material and his experience,” Asmussen
said.

— Frankfurt bureau: +49 69 720 142; email: frankfurt@mni-news.com —

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