–Updates Story From 0447 ET With Comments On Phase-In Period

FRANKFURT (MNI) – The European Central Bank will need about one
year before it can take on the role of a single banking supervisor for
the Eurozone, ECB President Mario Draghi said Tuesday.

Still, Draghi said it was critical that the European Council’s
regulation on a single supervisor be adopted as originally planned on
January 1, 2013. This would allow the ECB to begin consultations with
national supervisors on how to move forward.

“The ECB is not supposed to take over supervision in three months
time,” Draghi said in testimony before the European Parliament in
Brussels. “There is a phasing in time. We foresee that one year will be
needed.”

Draghi also said it was important to resolve the debate over
whether direct bank recapitalization by the ESM rescue fund – planned
once a single EMU supervisor is established – should retroactively
include capital already paid in by governments before the new regulatory
agency is set up.

“I don’t want to comment on that, but the sooner the doubts about
what is legacy and what isn’t legacy are clarified…the better,” Draghi
said.

Earlier in his testimony, Draghi said non-Eurozone banks should
have the same conditions for taking part in an EU-wide banking
supervisor.

“The ECB and the whole way in which we look at the [single
supervisory mechanism] is very open to non-euro members which want to
opt in,” Draghi said. “The ECB is very, very open to have them on the
same, equal footing.”

Draghi also argued that a harmonized resolution mechanism for banks
was a “very important” element of having a single banking supervisor,
though he did not explicitly say such a resolution mechanism had to come
into effect at the same time as the single supervisor.

Draghi reiterated that a there should be a “strict separation”
between the ECB’s new role as a bank supervisor and its traditional
monetary policy role. He insisted that a single supervisory mechanism
without all European Union members would not split the internal market
within the EU but instead would enhance it.

“I don’t think, frankly, this is going to cause any problem from
the internal market viewpoint.” Instead, having a common rule book for
many members means “the internal market will actually benefit from this
development of the single supervisory mechanism.”

Draghi also acknowledged that fiscal consolidation by EMU members
is harming growth in the short run but argued it was necessary to
restore growth prospects over the longer term.

“It is without doubt that the process of fiscal consolidation in
the short term will depress and has depressed outputs in different parts
of the euro area,” he said. “But what’s the alternative?” Fiscal
consolidation must hold out “a prospect at the national level of
restoring growth,” he asserted.

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

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