Constâncio concerned about credibility in wake of SSM

Vítor Constâncio, the vice-president of the European Central Bank (ECB), on January 29 warned the central bank's supervisory duties could damage its reputation as a monetary authority, but rejected the notion of a conflict of interest between the two roles.

Constâncio, speaking in Frankfurt, re-affirmed the ECB's need for credibility if it is to effectively conduct monetary policy. When the single supervisory mechanism is active, any negative event in the banking industry that occurs under the ECB's watch could damage that credibility, he said.

"The risk is real because as we all know, supervision is an area that can never be perfect as it lacks the resources to see everything, meaning that accidents are always possible," he said.

The vice-president firmly denied any overlap between the two functions, though. He insisted the ECB will have "clear, separate and hierarchical mandates that place price stability separate from other concerns".

Click here to read the speech.