Deal sealed on bank supervision
By Manon Malhère | Friday 29 June 2012
The heads of state and government of the eurozone states reached an agreement on bank supervision, on 29 June, which involves the European Central Bank (ECB). This is a prerequisite for the European Stability Mechanism (ESM) to be able to loan money directly to banks. The agreement represents the first step towards the establishment of a banking union, which has yet to see the light of day.
There are many questions still, starting with the level of involvement of the non-eurozone member states. The ball is now in the European Commission’s court, which is shortly due to present legislative proposals to establish “a single supervisory mechanism” so the Council can examine them “as a matter of urgency by the end of 2012,” according to the declaration by the 17 eurozone members. It will be a tricky exercise given that the Commission’s proposal will be based on Article 127 Paragraph 6 of the Treaty on the Functioning of the European Union (TFEU), which requires a unanimous vote by the Council, ie the 27 member states, after consultation with the European Parliament and the ECB.
One thing is certain: the ECB will play the key role, as sole supervisor, since the article lays down that the Council may “confer specific tasks upon the European Central Bank concerning policies relating to the prudential supervision of credit institutions and other financial institutions with the exception of insurance undertakings”.
Several scenarios are already doing the rounds as to how the non-eurozone member states will be involved in this bank supervision. Presumably, the idea would be to find an acceptable relationship between the ECB and the European Banking Authority (EBA) to rally the ten other member states. The idea of creating other structures has also been broached, as well as the idea of associating interested non-eurozone member states to the ECB in one way or another.
Karel Lannoo of the Centre for European Policy Studies (CEPS) told
Europoliticsthat it was urgent to move forward because the situation is an extreme one for banks. He also stressed that the unanimity of the finance ministers is needed.
Europoliticsunderstands that the UK would not be opposed to bank supervision for the eurozone. On the contrary, this would serve London well for its banks.
This supervision is to be one of the foundations of the banking union (along with a collective European banking resolution and deposit guarantee system), which is part of the report on enhancing the economic and monetary union drawn up by the President of the European Council, Herman Van Rompuy, in cooperation with the presidents of the Commission, the Eurogroup and the ECB.
In their conclusions, the EU member states’ leaders called on them to present a first report in October and a final report before the end of 2012.