Brussels, 04/12/2012 (Agence Europe) - The ECOFIN Council on Tuesday 4 December did not manage to reach agreement in principle on the draft legislation introducing a eurozone bank supervision mechanism under the aegis of the ECB. The draft Cypriot Presidency compromise set out the areas needing to be ironed out: the division of labour and powers between the ECB and national regulatory authorities; and Supervisory Committee governance and voting rights at the European Banking Authority (EBA) (see EUROPE 10743). Noting that after a three-hour discussion, national views were still divergent, the Cypriot Presidency threw in the sponge and convened a special ECOFIN Council meeting for 12 December.
We are moving closer to agreement, but a little more time is needed, said Cypriot finance minister Vassos Shiarly. There is nothing that can't be ironed out, said French finance minister Pierre Moscovici. Germany and France have to have a meeting of minds on the common eurozone bank supervisory system if agreement is to be possible.
On the timing of the talks, there are two camps. Countries like Germany, Austria and Sweden say time should be taken to ensure a good agreement is reached. Quality is more important than speed, explained the Austrian finance minister, Maria Fekter. Spain, Ireland, France and Portugal say speed is of the essence, ideally later this year. Portuguese finance minister Vitor Gaspar said it was urgent to cut the automatic connection between bank problems and the sovereign debt by introducing the bank supervisory scheme as a precondition for direct bailout of struggling banks by the eurozone bailout fund.
Division of labour between the ECB and national supervisory authorities. Here too there are opposing camps. Several delegations want to leave their country's supervisory authority wide room for manoeuvre when it comes to monitoring small banks, with the ECB directly monitoring big banks, the too-big-to-fails and banks in receipt of state aid. Nobody believes the ECB will be capable of supervising alll 6,000 banks in the eurozone, explained Germany's finance minister, Wolfgang Schäuble. Finland says national authorities must retain sole power over smaller banks, as does Austria.
Backed by the European Commission and the ECB, many countries warn against a two-tier mechanism, saying that the ECB must be the EU supervisor holding the ultimate responsibility although leaving the door open for various types of supervision, as demanded by the European Council. Opposing the idea of a dual system, Moscovici said he could go along with differentiated monitoring as long as the ECB has as much room to intervene as possible, in any bank, where necessary, because otherwise the legislation would make no sense. Gaspar said that France, Portugal and Italy agree on the need to avoid a fragmentary system. On behalf of Italy, Vittorio Grilli accepted the idea of differentiation as long as a single framework, procedures and methodology were set up to give the ECB the power to issue instructions and even intervene directly.
Everything hangs on the criteria used to determine the size of “smaller” banks - size, importance for a country's economy, scale of cross-border business and so on. Austria and Malta do not want any figures to be laid down. Estonia wants the ECB to decide for itself which banks it will directly supervise. Polish finance minister Jacek Rostowski said smaller banks are those managing less than €60 billion in assets. EU Internal Market Commissioner Michel Barnier does not want over-rigid figures to be set, but would go along with them if they were low enough.
Supervisory Committee. In order to hive off monetary policy from bank supervision at the ECB, a Supervisory Committee would be set up, on which all countries involved in the supervisory mechanism would be represented, whether or not they are in the euro. The committee would prepare proposals (draft decisions) that the ECB Governing Council would then rubberstamp. Under the Cypriot compromise, if the Governing Council objects to a decision, then non-euro countries would have the right to withdraw. Luxembourg's finance minister, Luc Frieden, said the economic and budget impact of bank supervisory decisions needed to be examined until the EU gets a single bank bailout system.
Anders Borg repeated Sweden's view that technical amendments should be made to the EU treaty to ensure perfect equality of treatment between euro and non-euro countries. Understanding Sweden's view, Schäuble said that not all the keys to the mechanism should be handed to the ECB and it would be possible to make use of Article 352 (rather than Article 127.6) of the EU treaty. Poland and the Czech Republic support Germany's idea. Recognising the need to continue work to ensure proper separation of monetary policy and bank supervision at the ECB, Moscovici rejected the idea of changing the treaty, saying it was complicated and a waste of time.
On voting rights at the Supervisory Committee, most delegations (including Ireland) want a one country-one vote system, unlike Germany, which wants a simple majority vote for any decision about a single bank and a qualified majority vote for decisions about more than one bank. Unlike the Commission and the ECB, most countries want the head of the Supervisory Committee to be appointed by the ECOFIN Council.
EBA. In order to placate the United Kingdom, which will not take part in the eurozone bank supervisory system, the member states recognise the need to change voting rights at the EBA for disagreements between national supervisors. They oppose the idea, however, of amending the qualified majority rule for deciding on technical standards. (MB/transl.fl)