Monetary policy and banking supervision: coordination instead of separation. CEPS Policy Brief No. 286, 12 December 2012

Introduction. Following the June 2012 European Council decision to place the ‘Single Supervisory Mechanism’ (SSM) within the European Central Bank, the general presumption in the policy discussions has been that there should be ‘Chinese walls’ between the supervisory and monetary policy arms of the ECB. The current legislative proposal, in fact, is explicit on this account. On the contrary, however, this paper finds that there is no need to impose a strict separation between these two functions. The authors argue, in fact, that a strict separation of supervision and monetary policy is not even desirable during a financial crisis when the systemic stability of the financial system represents the biggest threat to a monetary policy that aims at price stability. In their view, the key problem hampering the ECB today is that it lacks detailed information on the state of health of the banking system, which is often highly confidential. Chinese walls would not solve this problem. Moreover, in light of the fact that the new, proposed Supervisory Board will be composed to a large extent of representatives of the same institutions that also dominate the Governing Council, the paper finds that it does not make sense to have Chinese walls between two boards with largely overlapping memberships. In addition, it recommends that some members of the Supervisory Boards should be “independents” in order to reduce the tendency of supervisors to unduly delay the recognition of losses.

An end to support for renewables? The wrong battle to fight. CEPS Commentary, October 2013

On 11 October 2013, the CEOs of 10 large European energy utilities issued a warning that the European energy infrastructure is “in jeopardy” and called for an end to support for renewables on grounds that wind and solar were mature technologies that no longer required such support. Given the unlikelihood, however, that EU decision-makers would renege on their decarbonisation or renewable energy targets, Fabio Genoese asks in this commentary whether it would not be a better strategy for conventional generators to explore new business models built around a ‘reliability pricing system’, in which nearly 100% reliability would be guaranteed for base load but not for peak demand.