30 August 2012

José Manuel Barroso: Banking union is the next key step for eurozone integration

On 12 September, the Commission will present its proposals for a Single Banking Supervisory Mechanism based on three key principles:

• Single supervision: Within the eurozone, coordination between national supervisory bodies is no longer enough. Risks that emerge in one country can affect the entire currency area. Common banking supervision is needed for strengthening confidence among countries using common financial backstops.

• Credibility: The eurozone's new banking-supervision mechanism will have the ECB at its heart. The choice of tasks to be entrusted to the ECB will ensure rigorous, high-quality, and equal prudential supervision of eurozone banks, thereby contributing decisively to maintaining confidence between the banks – and thus increasing financial stability throughout the eurozone. Close cooperation with national supervisors will be built into the framework.

The ECB's supervisory role will be fully separated from its monetary policy responsibilities. In parallel, the European Banking Authority will continue to perform its existing tasks, namely developing the single rulebook for the entire single market and ensuring convergent supervisory practice throughout the EU.

• Broad coverage: All banks in the eurozone will be covered by the new European supervisory system. And we will need to bridge the gap between eurozone members and EU members that remain outside the monetary union, some of which may want to participate in the new supervisory mechanisms.

The road that we have decided to follow will allow for swift action. The Single Banking Supervisory Mechanism does not require a treaty change and should be in place by January 2013.

Common and more integrated supervision is the first step towards a banking union. Next, the Commission will build on our current proposals for deposit-guarantee schemes and bank resolution mechanisms to move toward a single resolution fund and a single resolution authority. Once these proposals are implemented, the banking union will be complete.

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.

Full article

© The Guardian