Brussels, 12/09/2013 (Agence Europe) - On Thursday 12 September, the European Parliament (EP) endorsed a political agreement on draft legislation to introduce a single bank supervision system in the eurozone under the aegis of the European Central Bank in the autumn of 2014, which will change the way that the European Banking Authority (EBA) functions (see EUROPE 10810).
The bank supervision system is the first arm of banking union, work on which began in June 2012 at a eurozone summit. The system will mean the ECB will directly supervise between 130 and 150 big banks with assets totalling more than €30 billion, representing total assets (share of GDP) of the host country of more than 20% (except where below €5 billion), along with nationalised banks in the eurozone. As desired by Germany, big banks will continue also to be supervised nationally with national authorities applying a common batch of prudential rules.
In order to separate monetary policy from bank supervision, the ECB will set up a supervisory committee on which national bank supervisory bodies will be represented. The supervisory committee's decisions will be endorsed by the ECB Governing Council - or renegotiated where necessary. Detailed measures have been set out to enable non-euro banks (whose membership of the new system is optional) to be treated on a par with eurozone country banks. Non-euro countries have the right to withdraw from the system if the Governing Council objects to a draft decision made by the supervisory committee.
Marianne Thyssen (EPP, Belgium), one of the two EP rapporteurs on this issue, stresses the importance of the agreement on cooperation and the exchange of information between the ECB and the EP that will be annexed to the legislation in order to make the new bank supervision system accountable (see EUROPE 10919). The other rapporteur, Sven Giegold (Greens/EFA, Germany), said that the supervisory system would be able to sever the unhealthily close ties between big banks and the national supervisory bodies. EU Internal Market Commissioner Michel Barnier said the single supervisory system would put more than 6,000 banks in the extended eurozone in harmonised and coordinated high-quality supervision. It preserves the single market, allowing any member state that so desires to join the new mechanism. “Today marks a real step forward in setting up a banking union, which is a core element of a genuine economic and monetary union. We will do our utmost to put in place all organisational requirements, with the aim of assuming our supervisory responsibilities one year after the legislation enters into force, and look forward to working with national authorities to contribute to the restoration of confidence in the banking sector”, said Mario Draghi, President of the ECB, in a press release.
Moving on with banking union. Barnier said that much work remains to be done on banking union, such as cleaning up bank balances through a special assessment to be carried out by the ECB after the summer of 2014 (see related article) and bank stress tests by the EBA. He said banking union must focus on its second pillar, bank resolution. To this end, agreement will be needed by the spring on the draft directive on bail-ins in the European Union. Agreement is also needed on the draft legislation to set up a bank resolution authority with a committee of national authorities and also a bank resolution fund, financed by the financial industry ahead of any crisis (see EUROPE 10885). Barnier said the Commission was not trying to gain extra powers for itself, referring to fears in Germany which argues that the current treaty does not give the Commission any decision-making powers in this domain. (MB/transl.fl)