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Let’s cede bank supervision to Europe

I am glad to see that, albeit in his characteristically oblique way, J.-C. Trichet is pushing again for an ECB role in bank supervision.

I have long been an advocate of a euro-wide bank regulator. Isn’t it now obvious that we in Ireland should be cheerleaders for an early move in this direction. We urgently need all the help we can get in financial regulation — even for nationalized banks.

2 replies on “Let’s cede bank supervision to Europe”

There are obvious reasons why Ireland has a particular interest in this happening.

But more generally, the division of regulation depends on the extent of the market. Or at least it ought to.

And actually, when you look at commodity trade, that has been the case to an extent. The US railway spawned not only the robber barons, but federal anti-trust policy. The European Single Market Programme went hand in hand with the development of EU-wide competition policy.

Why European governments have been so much more tolerant of ‘regulatory arbitrage’, as it is charmingly known, in the financial sector, is an interesting political economy question.

We use “outside agencies” to set of standards much in our lives (eg. weights and measures, currencies – first the £ now the €). Why not a bank regulator? Any chance that our great and good would take a lead on this by approaching the Finnish, Dutch or Belgian Central Banks (all €uro countries) to help us with a new banking regulatory regime? To my mind, it is just a recognition of the limits of what we, as a country with a smallish population, can do the the standard that we now require. As such it is similar to that which led to the repeal of the Control of Manufacturers’ Act in the late 1950s leading on the the active seeking of FDI to provide employment opportunities. More recently, SFI can be interpreted as being out of the same cast of mind. That said, other small European countries did not seem to feel the same lacunae in managing their economies eg. Denmark, Austria, Portugal, Sweden, Finland, Norway.
All that said, does the fact that this is only the second comment on Patrick’s idea mean that his idea does not appeal at all, at all?

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