Matthew Elderfield voices rare criticism of the European Central Bank
THE Deputy Governor of the Central Bank has voiced rare criticism of the European Central Bank, saying an over centralised, rigid model of new European banking supervision could damage the single market and banking in countries including Ireland.
`In a speech in London today, Matthew Elderfield warned that moves towards a European banking union should not made up of euro area and non euro countries must not undermine the single market.
He warned that greater powers for the European Central Bank should be allowed to damage relations with non-euro member states.
In a rare criticism by a senior central bank figure Mr Elderfield said that did happen earlier this year.
"The ECB's stance towards euro clearing by LCH is an unfortunate precedent and it is important that this philosophy does not spill over into banking supervision," Mathew Elderfield said today.
He was referring to a case where the UK said it will sue over new ECB rules that mean any "clearing houses" that deal in large volumes of euro trades must be based in the eurozone.
Clearing houses are third parties that handle deals for both sides of a financial transaction.
The move is seen by Britian as a threat to its status as a major finance hub.
European leaders need to make sure the tools to save banks are in place before responsibility for bank supervision is taken over by the new banking supervisor, he said.
If not the bill will be passed back to governments, putting pressure back onto national finances, he said.
"It is a distinctly unpleasant situation to be asked to put out a fire and to find your fire extinguisher is half-full and that the only way to get a re-load is to increase debt and austerity," Elderfield said.