The EU Home and Home-Host Dilemma

Abstract

This chapter analyses the issues from the perspective of home country control and host responsibilities, and the role of the ECB as a single supervisor to minimize the potential conflicts between home and host participating Member States. From a cross-border dimension, the use of consolidated supervision is traditionally the starting point to configure the relationship between home and host, and in the EU context it is clearly positioned on home country control. However, it is evident that there is a potential threat with the lack of reciprocity within the consolidated supervisory relationship. This is particularly acute for those supervising group subsidiaries where the criteria for cooperation is not as clear as it is for branches. It is argued that this can potentially lead to conflicting interests between the parent and the subsidiary since risks on either side may not be visible to each other. Supervisory colleges and recovery planning are principal mechanisms to form a consensus for group perspectives and host perspectives. However, the level of administrative discretion that exists within the current mechanisms can lead to home country bias. Since the ECB is in the shoes of the group consolidated supervisor, it will really need to demonstrate that it truly reflects both sides.