Abstract/Summary

The intertwined relationship between the objectives of banking supervision and monetary policy remained for a long-time part of a rather theoretical debate. It took a major GFC for the policymakers to realise that there were gaps in the existing regulatory and supervisory framework, which subsequently opened the way for the central banks’ involvement in both micro- and macro-prudential supervision at international and EU level. Prior to the 2007-2009 financial crisis, the optimal model of central banking governance and institutional framework at both international and EU level, focused on monetary policy objectives. Part of the same orthodoxy was the prominence given to central bank independence and to institutional arrangements focused primarily on inflation targeting. The European Central Bank (ECB), being a creature of its time, was designed as a purely monetarystability-oriented central bank and was also granted a high level of independence. However, housing monetary policy and banking supervision under the ECB’s roof, has radically changed its role and the balance between existing and new powers within the EU banking framework. To this end, this thesis critically examines the centralisation of banking supervision in the EU, by exploring the nexus between monetary policy and banking supervision, and the compatibility of their combination within the existing legislative framework. Having examined the historical context of the debate, recent developments and underlying policy concerns in the pre- and post- Great Financial Crisis (GFC) era, this thesis concludes that the conferral of supervisory tasks on ECB has created a complex system of cooperation between national and supranational level, and between existing and newly established tasks and objectives. This has resulted in stretching the role of ECB beyond its original mandate as set by EU primary law, exceeding the wording of Article 127(6), TFEU. Therefore, drawing on the particular synergies involved, this thesis suggests that the only avenue in transforming the ECB into a truly supranational supervisor with full discretion, is the amendment of the Treaty and the empowered of the ECB with direct supervisory powers.