Who can guarantee an efficient banking oversight?

Courts of audit cannot revise the work of bank supervisors

8. december 2016 ob 11.29 • Ljubljana - MMC RTV SLO

The Court of Audit is unable to inspect the quality of the oversight performed by the Bank of Slovenia, headed by Boštjan Jazbec, over banks in Slovenia. Foto: BoBo

The European Court of Auditors reviewed the Single Supervisory Mechanism for bank oversight, which is the responsibility of the European Central Bank (ECB). However, the audit did not provide the court will all the necessary information, as it has limited jurisdiction over the work of the ECB.

The European Central Bank (ECB) supervises 127 banking groups, among them also the Slovenian NLB, NKBM and Abanka. But who can guarantee that the banking oversight is efficient? The European Court of Auditors wanted to find that out, but lacks the legal basis to do it.

"It can revise the operations of the ECB from an economic standpoint, that’s the operational efficiency of managing the ECB. But even that can’t be fully carried out due to the ECB’s interpretation of what operational efficiency means," says Samo Jereb, a member of the European Court of Auditors.

"They opted for a very restrictive definition of the term efficiency. Therefore we did not receive the documentation needed to be able to make an opinion about its operational efficiency," warned Jereb.

From the available documentation the European Court of Auditors assessed that the ECB and national authorities have insufficient oversight capabilities. However, courts of audit cannot follow in detail the work of bank supervisors. They are not allowed to.

Legislation has it that way. Slovenia’s Court of Audit is also unable to inspect the quality of the oversight performed by the Bank of Slovenia, headed by Boštjan Jazbec, over banks in Slovenia. Some time ago Governer Jazbec said that the auditing of the Bank of Slovenia is carried out by an independent outside international auditor. If it was done by the Court of Audit, it would infringe the independence of Slovenia’s central bank.
The Bank of Slovenia understands that the ECB, faced with the demands from the European Court of Auditors, passed on information it assessed was closely connected with the intentions of the audit, and which could not be misused for political or other intentions. The issue will be debated by the Commission for Public Finance Control.