The European Parliament is gearing up for a pitched battle with the Council on financial supervision, threatening to hold a plenary vote on 7 July despite an agreement being “weeks away”. The two institutions have been wrestling over how much power should be handed over to three new EU-level watchdogs, which are scheduled to open their doors in January next year. Parliament is keen on giving the agencies more clout, while member states want decision making to rest with national supervisors. Internal Market Commissioner Michel Barnier said, on 1 July, “This is a very important issue and I’m hopeful we will be able to reach agreement in the next few weeks”.

Member states would prefer to put a first-reading vote off until September, giving both sides time for further talks this month. A final meeting between the three institutions will take place on 5 July, but if talks break down and the Parliament goes ahead with a vote, the process will shift into second reading and could face delays, say EU diplomats. “Second reading extends the timetable way past where we would want to be,” said one. “We would not like to see too many delays,” said another. “I hope [MEPs] will not vote next week. Everybody is rather confident we might find an agreement.”

The Commission published proposals, in September 2009, to set up four new watchdogs: three with binding control over national supervisors in the banking, securities and insurance markets (European supervisory authorities, ESAs), and a European Systemic Risk Board (ESRB) to predict future bubbles and issue risk warnings. Member states secured a tough safeguard clause in their December compromise, allowing governments to appeal decisions handed down by the three ESAs, but Parliament’s rapporteurs on the four main regulations are demanding strict conditions be attached.

MEPs in the Committee on Economic and Monetary Affairs (ECON) tabled their position in May (see Europolitics3977), suggesting more decision making power be handed over to the ESAs. Aside from requesting a watered down safeguard clause, they want the ESAs to be responsible for “European entities” (Article 6), such as credit rating agencies, trade repositories or clearing houses, and say the bodies should have extra clout during future crises (Article 10), issuing orders to individual banks. They are also calling for the ESAs to be able to ban the trade in harmful financial instruments and want all four watchdogs - including the ESRB - to shift their headquarters to Frankfurt. Suggestions to set up pan-EU banking resolution and deposit guarantee funds and a move to give the ESAs more responsibility for supervising large cross-border banks (Article 12) have also caused rifts with member states, who are keen to retain power at national level.

COMMISSION COMPROMISE

The latest compromise tabled by the EU executive (dated 29 June) attempts to craft a balance between the two, supporting the Council on direct supervision of European entities (the ESAs would only have power over credit rating agencies) and siding with the Parliament on emergency powers (ESAs would have the ability to intervene directly in banks’ affairs where there is a clear breach of Community law or if the particular situation is covered in the regulations). n

Main issues

Article 5: Parliament wants ESAs headquartered in Frankfurt. Council and Commission want three seats: Frankfurt, Paris and London

Articles 6,10,11: Parliament wants direct powers for ESAs: over European entities, in emergency situations and cross-border disputes, when it comes to banning certain products and supervising systemically important banks. Council is against this, while Commission sees limited extra powers

Articles 7-8: Parliament wants a role for Commission in technical standards, Council does not

Article 23: Parliament wants more limited safeguard clause. Council and Commission accept the compromise agreed in December

Article 29: Parliament and Council want QMV voting on specific issues, the Commission supports the Council’s position