The ECB’s new role as top policeman for the eurozone’s biggest banks risks being undermined by a staffing shortage, according to a first audit of the institution carried out by EU officials.

The report from the European Court of Auditors also flags potential “conflicts of interest” at the Frankfurt-based central bank, which must carry out its new tasks alongside its traditional responsibility for monetary policy.

The auditors’ findings are the first independent review of the ECB’s bank supervision department, which has just begun its third year of activity. The decision of finance ministers to transfer oversight of their banks to the European level has been seen as one of the defining moments of the eurozone sovereign debt crisis.

Specific concerns raised in the auditors’ report include the ECB being overly reliant on staff from national central banks and banking supervisors.

Under EU law, the ECB is responsible for directly overseeing about 120 of the largest and most systemically important financial institutions in the EU. Still, the auditors’ report found that so far ECB staff have only led 12 per cent of the on-site inspections of these banks, and that 92 per cent of the members of inspection teams came from national authorities.

We fail to understand why the ECB is not allowed the level of staff resources it requires for the effective and efficient performance of its mandate and missions

According to Neven Mates, the member of the court of auditors responsible for the report, the composition of the teams is a sign of “staff shortages” that risk undermining the ECB’s supervision work.

“The purpose of the new mechanism is that supervision is done from the European level,” he said. “If you are in charge of direct supervision of the most complex banks, you want that it is done by your staff.”

His comments echo warnings from the ECB’s own staff union that employees are overloaded following eight years in which the central bank has borne much of the brunt of overcoming financial and economic crises that at one point threatened to overwhelm the single currency itself.

The ECB has consistently defended its performance in building up its bank supervision arm, arguing it had, in effect, been asked to construct a new system, stretching across 19 countries, in record time.

The central bank has so far recruited more than 1,000 people to its supervision department, increasing the ECB’s workforce by about 50 per cent.

In a formal response attached to the auditors’ report, the bank said it had undertaken “tremendous efforts” within “an exceptionally short and challenging timeframe”.

Concerns over staffing levels were raised last year by the International European Public Services Organisation, the official trade union of the ECB. It said in a letter addressed to central bank governors that it was concerned that the supervisor was suffering from “severe and systematic understaffing”.

“We fail to understand why the ECB is not allowed the level of staff resources it requires for the effective and efficient performance of its mandate and missions,” it said.

The ECB’s works council has also warned of evidence that employees in the banking supervision arm, known as the SSM, are overstretched.

“The staff at the SSM are overloaded and are being put under a lot of pressure,” Carlos Bowles, head of the works council, told the Financial Times. He added that he had received “complaints of favouritism in the recruitment process, based on people’s nationalities and personal ties”.

The ECB said the institution was committed to a full and ongoing dialogue with its employees, adding that over 100 meetings had taken place over the past few years with the central bank’s staff committee and the main trade union.

“The ECB has a well-established social dialogue framework which is fully in line with peer organisations,” it said.

Separately, the EU court of auditors in its report urged the ECB to think more deeply about how to ensure its decisions as a supervisor remain separate from its objectives when it comes to monetary policy.

This is a longstanding concern in Berlin, where Wolfgang Schäuble, Germany’s finance minister, has persistently urged that bank oversight would be better entrusted to an entirely new EU institution.

A particular issue raised by the report is that Danièle Nouy, the head of the ECB’s bank supervision arm, does not exercise full control over her budget, with final decision-making power resting with the central bank’s governing council.

This should be addressed, as it was a threat “to the perceived independence of the supervisory function”, the auditors said.