Wall Street Journal
August 9, 2012
Brussels may to all outward appearance have succumbed to its usual August lethargy, but European bureaucrats will be working overtime to deliver a proposal next month on a new policeman to oversee the euro zone's banks.
The proposal, due to be announced on Sept. 11, is meant to be the first step toward the development of a banking union within the common-currency area. The supervisor was agreed by euro-zone leaders at a summit in June in an effort to break the link between feeble banks and governments with shaky finances that has undermined financial-market confidence in the euro.
It's the first step, but also the easiest. Creating a euro-zone bank supervisor doesn't on its own involve pooling national financial risks as would be required in other necessary elements of a banking union: an agency to wind up or recapitalize failing banks and a fund to guarantee depositors. But even this is fraught with political minefields.
The leaders decided that the supervisor should be part of the European Central Bank. This, they thought, had several advantages.
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