September 26, 2018 / 8:35 PM / in a month

ECB shortlist three to head its bank supervision arm: source

FRANKFURT (Reuters) - The European Central Bank has shortlisted three candidates to head its bank supervision arm from next year, picking seasoned veterans to oversee a bloated sector weighed down by the legacy of the bloc’s debt crisis.

FILE PHOTO: European Union flags flutter outside the European Central Bank headquarters in Frankfurt, Germany, April 26, 2018. REUTERS/Kai Pfaffenbach/File Photo

The ECB narrowed the field to Irish central bank Deputy Governor Sharon Donnery, European Banking Authority chief Andrea Enria and French financial markets regulator Robert Ophele, a source familiar with the decision said.

The winner will oversee the euro zone’s biggest banks holding over 20 trillion euros’ ($23 trillion) worth of assets but still struggling with low margins, high costs, and a massive pile of soured credit.

FILE PHOTO: Andrea Enria, chairperson of the European Banking Authority, speaks at Reuters Summit interview in London, Britain, September 25, 2017. REUTERS/Afolabi Sotunde/File Photo

The ECB will consult a European Parliament committee before narrowing down the list to a single candidate, who will then require approval from Parliament and the heads of government before taking over from Daniele Nouy at the start of next year.

The ECB declined to comment.

Taking over the Single Supervisory Mechanism, one of the EU’s newest institutions, the new chief will be tasked with making the sector simpler, more uniform and less risky, eliminating one of the biggest obstacles in completing the banking union.

Legacy risks, primarily soured debt, have been the biggest obstacle in gathering the political support for a euro zone wide deposit insurance scheme, a key plank in the banking union that would widen the safety net by more sharing of financial risk.

FILE PHOTO: Deputy Governor Sharon Donnery and Governor Philip R. Lane (R) speak at a Central Bank of Ireland event in Dublin, November 23, 2016. REUTERS/Clodagh Kilcoyne/File Photo

But Germany has long said that until the sector is cleaned up, it is not willing to take part, fearing that German taxpayers would end up having to foot the bill for reckless lending done in some cases a decade ago.

Donnery has been seen for weeks as the favorite as she is expected to enjoy the support of Germany after taking a no-nonsense stance toward banks for hoarding massive piles of non-performing loans, other sources said earlier.

But Enria, the head of the European Banking Authority, is also seen as a strong candidate for being tough on bad loans, a major problem for banks in his native Italy, as well as Greece, Portugal and Cyprus, two other sources said this week.

The sources said that gender may also play a factor in the process as the ECB has struggled to appoint women into top positions and the departure of Nouy will further reduce the number of women in top jobs.

Reporting by Balazs Koranyi; Editing by Robin Pomeroy

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