While our eyes are currently firmly fixed on Greece, which is often perceived as the most acute threat to the Eurozone’s future, in the meantime the stability of the Europe’s monetary union is being undermined by the back door. That is because the newly established supervisory role for the European Central Bank (ECB) has recently been challenged at the Court of Justice of the European Union (CJEU).
As of November last year the ECB has become the main supervisor of Europe’s financial institutions. The idea of oversight concentrated in the hands of the ECB, and away from the national authorities was born out of the recent financial crisis which trapped countries in the ‘vicious circle’ between banks and sovereigns (i.e. public debt).
The final agreement, like any other compromise at the EU level, was paved by a number of concessions especially to the most powerful Euro-member, Germany. While originally the European Commission envisaged the ECB to regulate all Eurozone banks, no matter the size of their assets, Berlin insisted that the scope of the supervisory role be limited and more focused on major rather than smaller banks.