Luis M Linde: Reflections on the planned Banking Union in Europe Address by Mr Luis M Linde, Governor of the Bank of Spain, at the First Bank of SpainOMFIF Economists Club Meeting, Madrid, 21 October 2013. *  *  *  Dear colleagues and friends, ladies and gentlemen: It is a pleasure to host this first Banco de España-OMFIF Economists Meeting. I am fully confident that it has provided an excellent opportunity to review and assess the latest developments in the Spanish and European economy and the present situation of the Spanish Financial System. I would like to share with you some reflections on the Banking Union in Europe which is, as we all know, a very important matter for the present European financial scenario. The thrust for the design of such a fundamental reform as the Banking Union in the economic governance of the European Union has come from the crisis, both international and European. The euro zone financial and sovereign-debt crisis has shown the shortcomings of the European institutional framework, triggering a wave of reforms that would, otherwise, most probably, not have taken place. Last year, the Presidents of the Council, ECB, European Commission and Eurogroup agreed on the milestones for building a new Economic and Monetary Union, based, in principle, on four blocks: the banking union is the first of those blocks, to be complemented, according to the political design, a later stage, with a fiscal union, an economic union and, finally, a political union.
We will have to devise a system to make ECB responsibility compatible with a rational division of work, so the ECB will have the direct oversight of significant banks with the cooperation of the national competent authorities. The direct supervision of the Less Significant Institutions is for the National Authorities, which will have to comply with regulations, guidelines and general instructions issued by the ECB. In fact, the ECB will indirectly supervise such banks, having access to their data and the power to assume, if so decided, the direct supervision of any of them. It is important to underline that this is not going to be a two-tier system, but a single one with a distribution of tasks; this is not going to be a “confederation” of supervisors, but an “Union” of supervisors under a single European authority. Preparatory work already done to launch the Single Supervisory Mechanism At this point, I will briefly describe the work we have done, how the SSM is going to be set up in organisational terms, and the work ahead of us. Steered by a High-Level Group on Supervision, chaired by the President of the ECB, a preparatory structure has laid down the work schedule regarding the following areas: (i)  The mapping of all the EU banking institutions, to determine the supervisory regime applicable under the Single Mechanism Regulation.