In June leaders of the European Union reached an agreement pertaining to the creation of a single European banking supervisor – one which would centre on the European Central Bank.
As the plans stand, by January 2013 the ECB will monitor all banks which have accessed the European Stability Mechanism. By July they will have incorporated those banks pertinent to the financial system and by 2014 all euro-zone banks will be operating under supervision. This latest information comes from German newspaper Suddeutsche Zeitung, which cited EU Commissioner Michel Barnier as their source for this information. On Thursday the Austrian Financial Regulator demanded that any ECB supervision should affect all banks and not merely those deemed essential to the banking system, these proposals seem to adhere to that request.
The Commissioner apparently added that countries outside the euro-zone will be able to voluntarily offer their banks for ECB supervision.
In June leaders of the European Union reached an agreement pertaining to instating a single European banking supervisor – one which would centre on the European Central Bank.
As the plans stand, by January 2013 the ECB will monitor all banks which have accessed the European Stability Mechanism. By July they will have incorporated those banks pertinent to the financial system and by 2014 all euro-zone banks will be operating under supervision. This latest information comes from German newspaper Suddeutsche Zeitung, which cited EU Commissioner Michel Barnier as their source for this information. On Thursday the Austrian Financial Regulator demanded that any ECB supervision should affect all banks and not merely those deemed essential to the banking system, these proposals seem to adhere to that request.
The Commissioner apparently added that countries outside the euro-zone will be able to voluntarily offer their banks for ECB supervision.
President of the European Commission and former Portuguese Prime Minister Jose Manuel Barroso has released a statement strongly advocating such a union of EU Banks. In his opinion unifying all euro-zone and some EU banking systems is essential if the current economic crisis is to be overcome. Barroso stated: ‘Establishing a banking union by 2013 will not give Europe a magic wand with which to wave away the economic crisis overnight; but it is a major and crucial step to restoring the confidence of Europe’s citizens, international partners, and investors. It will ensure financial stability, increase transparency, make the banking sector accountable, and protect taxpayers’ money.’
Barroso disclosed that on the 12th of September the European Commission will lay out proposals regarding a Single Banking Supervisory Mechanism. The Mechanism will be based on three integral principles: single supervision (which aims to restore confidence through common banking supervision) credibility (to be achieved by the ECB performing all supervisory tasks to a high-quality as well as keeping their monetary policy responsibilities separate from their supervisory role) and broad coverage (whereby all euro-zone banks will be covered by the new system.
The broad coverage aspect of the Single Banking Supervisory Mechanism has a further intent. As Barroso puts it, it will attempt to ‘bridge the gap between euro-zone members and EU members that remain outside the monetary union.’ This comment has sparked some backlash from those who are calling for less, rather than more, European integration as well as those who believe Britain should take a big step back from the EU.
The euro-zone crisis is showing few signs of abating and Barroso was insistent regarding what path should now be taken. He said: ‘we must complete the unfinished business of economic and monetary union […] the European commission has long argued for the creation of a banking union as an indispensable step toward that goal. The commission’s upcoming proposals are part of a broader package leading to economic, fiscal, and political union that will redefine the boundaries of European integration.’
Barroso did not elaborate on what this ‘broader package’ could entail but further commented that ‘the crisis has starkly revealed the insufficiencies of existing banking supervision. We must go beyond co-operation and establish an EU-wide supervisory authority, particularly in the euro-zone. The link between sovereign debt and bank debt has to be broken once and for all.’
Barroso was also keen to dispel the doubts expressed by some regarding how committed the EU is to protecting the euro. He asserted ‘There is sufficient political will in the EU to do whatever is necessary to protect the euro, because the future of the single currency will determine that of European integration.’
Whether you agree with these proposals or not, the specifics relating to how the ECB will work in collaboration with the existing European Banking Authority and alongside the local regulators of individual countries have still to be confirmed. Furthermore, with Germany yet to rule on the legality of Europe’s permanent bailout fund and still opposing Draghi’s bond buying scheme, Barosso’s dream of complete ‘economic, fiscal, and political union’ in the euro-zone is still a long way off.