Our banks will be guinea pigs for new system
A tiny fraction of Europe's banks will come under the direct oversight of Europe's new banking supervisors when the new system comes into force next year, but almost all of our lenders will be affected. Across the euro-zone just 130 out of a total 6,000 banks will be directly overseen by the European Single Supervisory Mechanism (SSM).
The idea is that a single supervisor, especially one that is more physically distant from the banks it oversees, will be better able to spot problems brewing at banks or in countries and, crucially, be more inclined to step in and do something about it.
Irish banks aren't being brought into the new system in disproportionate numbers because they have a worse track record than lenders elsewhere. They do – it is just not the reason for the anomaly. Nor is it that Irish banks are especially big in European terms.
The biggest three domestic banks in every eurozone country will be subject to the new oversight, as will any lender whose assets add up to a fifth of the size of the home economy.
It is also the case that we have relatively few banks, each with a big share of the Irish market. That's unlike Germany, for example, which is home to hundreds of lenders, many comparable in size to any of our banks, but that won't be affected by the new system.
Indeed, lobbying by Germany to keep its smaller banks out of the system is the reason that all 6,000 eurozone banks won't be overseen by the new authority.
Our woeful history of failing to keep Irish banks in line means we're unlikely to get too angry about that, but it is worth noting just how unusual the Irish situation will be, particularly as we become the guinea pigs for an entirely new system of bank oversight.