FRANKFURT (Reuters) - Fabrizio Dicone had just one day to decide if he wanted to leave Rome and help create “the third big bang” - a new watchdog for Europe’s troubled banking industry.
Within a few weeks Dicone had cleared his desk at the Bank of Italy, said goodbye to his family and friends, and moved to Frankfurt - where the European Central Bank must set up the supervisory body from scratch by this time next year.
Dicone’s rapid career move shows how the ECB is going about a job it never expected to have to do. European Union finance ministers awarded the ECB sweeping new powers only a week ago, and on Wednesday it will already announce plans for scrutinising the health of about 130 leading euro zone banks.
The ECB faces a daunting task in creating the pan-European body; within 12 months it must hire 770 supervisors and around 230 support staff. With little time to train people for a job where experience counts, it must recruit talent from national supervisory organisations like Dicone and the private sector.
For Dicone, the career decision wasn’t too hard even though it meant leaving the Italian central bank’s palazzo in Rome for a modern office tower in Frankfurt, Germany’s financial centre which was rebuilt rapidly from the ruins of World War Two.
“It is a great opportunity,” Dicone said, sitting at the ECB’s headquarters seven months later. “In Rome, I used to apply the rules, here we are writing the rules. I’m honoured to be part of this group of pioneers.”
Dicone, 32, is part of a team compiling a manual that spells out how leading banks in all 17 euro zone countries will be supervised from Frankfurt from November next year.
The task is simple in theory and complex in practice. Supervision of the bloc’s most significant banks will move from national bodies to the ECB as part of the banking union project.
This aims to restore confidence in European banks after the crisis that erupted in 2008, and avert future shocks by achieving closer financial integration across the bloc.
Inside the ECB, this “Single Supervisory Mechanism” (SSM) is called “the third big bang”, following the launch of the ECB’s forerunner, the European Monetary Institution, and then the creation of the ECB itself in 1998.
The ECB recognises it is working against the clock, but it cannot cut corners in a project that will test the credibility of both the banking system and itself.
“What lies ahead of us is an enormous challenge. It is clear that we will not make any compromises in terms of quality when recruiting staff for the future bank supervisor at the ECB just to speed things up,” said ECB chief economist Peter Praet.
Praet, who is also responsible for staff matters on the ECB board, told the German financial daily Boersen-Zeitung that the SSM launch could be delayed in an emergency.
However, he added: “To be clear: we want to stick to the timetable and get everything done within 12 months. We have no interest in delaying the process. This is a crucial step for the currency union.”
Originally the ECB’s mandate was to set only monetary policy and its expanded role and workforce was unexpected, at least when it planned a landmark new headquarters in Frankfurt.
Staff are due to move next year into the building, being constructed over an historic market hall, but there won’t be room for the new arrivals. The 1,000 SSM staff will have to be accommodated in rented offices elsewhere in the city.
Complicating matters, the ECB couldn’t hire SSM staff on standard 3 or 5 years contracts because the project was not officially approved yet. Staff like Dicone joined on six month secondments, although these were extended for a year. However, it will be legally able to start recruiting early next month.
The national bodies have mixed feelings, suffering a brain drain as their top talent heads to Frankfurt. However, they may also benefit from having their own people at the centre of supervisory power, especially if they eventually return home with broader experience gained in Frankfurt.
“The success of the new European supervision is very close to our hearts,” said Rudolf Boehmler, Bundesbank board member in charge of human resources. “That’s why we actively support the establishment of the Single Supervisory Mechanism at the ECB, even it creates considerable challenges for us from a personnel management point of view.”
National supervisors’ work is far from over. While the ECB will oversee the 130 or so biggest and most important banks, these form a small proportion of the euro zone’s 6,000 lenders.
The German central bank, for example, expects about 100 of its employees will move to the ECB. It plans to replace them and is already advertising jobs in banking supervision. Additionally it will step up its training programme and recruiting from its own university at a castle northwest of Frankfurt.
While central banks back such an important European project, they are not necessarily offering up their best staff on a silver plate. “We are being supportive but not aggressive,” Austrian National Bank Director Philip Reading said, adding that he couldn’t say how many of his staff would make the switch.
As with many new projects, this uncertainty is common. A source at the Spanish central bank said it may look particularly at sending people to Frankfurt who have specific knowledge of a bank, such as the country’s biggest lender, Santander (SAN.MC).
About a dozen of its staff are doing preparatory work in Frankfurt although permanent numbers remain unclear. “From the Bank of Spain, we don’t know how many people they’ll want or what kind of profile they want - inspectors, more technical, judicial experts,” another source at the central bank told Reuters.
There are no national quotas and the vacancies will be posted over the next couple of months. However, the ECB has started hiring from the top, advertising first for the head of the new body’s supervisory board and senior managers.
Applications for the top job closed on Monday with the head of the French national supervisor, Daniele Nouy, the favourite.
Many hurdles remain. But staff like Esther Wehmeier - a 38-year-old graduate of the Bundesbank university who supervised big international banks at the German central bank before moving to the SSM project in April, are optimistic.
“When I arrived at the ECB, I thought ‘How can we manage? How can it work in such a short time?’ But step by step we are making big progress and you surprise yourself that it actually works,” said Wehmeier, who spent 16 years at the Bundesbank.
Additional reporting by Michael Shields in Vienna, Paul Day in Madrid and Carmel Crimmins in Dublin; editing by David Stamp