dimanche 29 mars 2015
ECB Nerves Fray on Greece as Supervisors Rile Central Bankers
Posted on 22:21 by nice news
Inside the five-month-old union between monetary policy and financial oversight at the European Central Bank, nerves are beginning to fray.
As officials seek to replace deposits fleeing Greek banks without blatantly financing the state, the efforts of the institution’s new Single Supervisory Mechanism to do its part are irking the old guard. Central bankers under ECB President Mario Draghi worry that overly-strict orders to lenders could worsen the Greek turmoil.
After building an institutional pillar that has supervised the euro area’s largest banks since November, the ECB is now facing one of the worst flare-ups in six years of sovereign-debt crisis. Officials must work out how to align their two policy arms in a way that can find a path through the Greek turmoil and set a template for handling banking turbulence to come. “Clearly there is tension, and it was obvious from the beginning that there would be,” said Nicolas Veron, a fellow at the Brussels-based Bruegel research group. “But there’s a productive kind of tension, like there was between Treasury Secretary Tim Geithner and Federal Deposit Insurance Corporation Chair Sheila Bair in 2008. It could end up creating the right mix of policy.”
Just as those U.S. policy makers in the 2008 financial crisis had to choose between the moral hazard of bailing out banks and the economic chaos of watching them fail, European officials are trapped between giving in to Greek cash demands and the political debacle of letting the country leave the euro.
Bubbling Up
That stress is bubbling up inside the ECB, affecting the interaction between central bankers in their new premises in Frankfurt’s east end, and bank supervisors installed in a temporary home two kilometers away.
SSM Chair Daniele Nouy may give clues on the relationship with the Governing Council when she testifies to the European Parliament on Tuesday.
Her officials sought this month to
As officials seek to replace deposits fleeing Greek banks without blatantly financing the state, the efforts of the institution’s new Single Supervisory Mechanism to do its part are irking the old guard. Central bankers under ECB President Mario Draghi worry that overly-strict orders to lenders could worsen the Greek turmoil.
After building an institutional pillar that has supervised the euro area’s largest banks since November, the ECB is now facing one of the worst flare-ups in six years of sovereign-debt crisis. Officials must work out how to align their two policy arms in a way that can find a path through the Greek turmoil and set a template for handling banking turbulence to come. “Clearly there is tension, and it was obvious from the beginning that there would be,” said Nicolas Veron, a fellow at the Brussels-based Bruegel research group. “But there’s a productive kind of tension, like there was between Treasury Secretary Tim Geithner and Federal Deposit Insurance Corporation Chair Sheila Bair in 2008. It could end up creating the right mix of policy.”
Just as those U.S. policy makers in the 2008 financial crisis had to choose between the moral hazard of bailing out banks and the economic chaos of watching them fail, European officials are trapped between giving in to Greek cash demands and the political debacle of letting the country leave the euro.
Bubbling Up
That stress is bubbling up inside the ECB, affecting the interaction between central bankers in their new premises in Frankfurt’s east end, and bank supervisors installed in a temporary home two kilometers away.
SSM Chair Daniele Nouy may give clues on the relationship with the Governing Council when she testifies to the European Parliament on Tuesday.
Her officials sought this month to
ECB Nerves Fray on Greece as Supervisors Rile Central Bankers
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