Brussels, 15/10/2012 (Agence Europe) - The European Central Bank (ECB) does not believe the new eurozone bank supervision system will be fully operational on 1 January 2013. ECB head Mario Draghi said at the IMF/World Bank meeting in Tokyo on Saturday 13 October that a common eurozone bank supervisory system is scheduled to come into force on 1 January 2013, but that didn't mean it would actually be operational on that date, because it will take more than a year to bring it fully on stream.
At the end of June this year, EU heads of state called for agreement in principle in 2012 on draft legislation currently on the table (see EUROPE 10645). Backed by France, Italy and Spain, EU Internal Market Commissioner Michel Barnier is pushing to get the legislation introduced as soon as possible. He says agreement in principle would enable the ECB to be able to take speedy decisions about struggling banks, particularly in Spain. The new system will be phased in during 2013 and will initially cover the biggest banks, followed at a later date by all 6,000 eurozone banks. Germany is calling for slower progress to ensure the system proves itself and arguing that the ECB will never be able to supervise all banks.
Given the sheer number of players in the legislative process, European sources say that the conclusions document to be published by the 17-18 October European Summit is unlikely to give a specific date, stating instead that agreement in principle is urgently required. The setting up of a common bank supervisory system will pave the way for direct recapitalisation of struggling banks by the European Stability Mechanism (bailout fund), which has lending capacity of €500 billion, without exacerbating the debt of countries where the banks are officially registered. The idea is to prevent bank crises leading to sovereign debt crises. (MB/transl.fl)