This is reposted from the original on the Hertie School of Governance European Elections blog.
The discussion of issues around the European Parliament Elections has been beating around the bush for quite some time now. Karlheinz Reif and Hermann Schmitt famously described European Elections as ”second-order elections”, in that they are secondary to national elections. A few weeks ago on this blog Andrea Römmele and Yann Lorenz argued that the current election cycle has been characterised by personality politics between candidates vying for the Commission presidency, rather than substantive issues.
However, the election campaigns could be an important opportunity for the public to express their views on and even learn more about one of the defining changes to the European Union since the introduction of the Euro: the European Banking Union.
Much of the framework for the Banking Union has been established in the past year after intense debate between the EU institutions. A key component of the Union is that in November 2014, the European Central Bank (ECB) will become the primary regulator for about 130 of the Euro area’s largest banks and will have the power to become the main supervisor of any other bank, should it deem this necessary to ensure ”high standards”.
A perennial complaint made against the EU is that it lacks transparency and accountability. While there are many causes of this (not least of which is poor media coverage of EU policy-making), the ECB’s activities in the Banking Union certainly are less than transparent according to the rules currently set out. As Prof. Mark Hallerberg and I document in a recent Bruegel Policy Note, financial regulatory transparency in Europe and especially the Banking Union is very lacking. Unlike in another large banking union –the United States, where detailed supervisory data is released every quarter – the ECB does not plan to regularly release any data on the individual banks it supervises.
This makes it difficult for citizens, especially informed watchdog groups, to independently evaluate the ECB’s supervisory effectiveness before it is too late, i.e. before there is another crisis.
The European Parliament has been somewhat successful in improving the transparency and accountably (paywall) of the ECB’s future supervisory activities. Unlike originally proposed, the Parliament now has the power to scrutinise the ECB’s supervisory activities. It will nonetheless be constrained by strict confidentiality rules in its ability to freely access information and publish the information it does find.
In our paper, we also show how a lack of supervisory transparency is not exclusive to EU supervisors – the member state regulators, who will still directly oversee most banks, are in general similarly opaque. We found that only 11 (five in the Eurozone) out of 28 member states regularly release any supervisory data. Member state reporting of basic aggregate supervisory data to the European Banking Authority is also very inconsistent.
European Parliamentarians could use the increased attention that they receive during the election period to improve public awareness of the important role they have played in improving the transparency and accountability of new EU institutions. Perhaps, after the election, they could even use popular support that they may build for these activities during the election period to get stronger oversight capabilities and improve financial supervisory transparency in the European Banking Union.