26 September 2012

Banking union: Economic Affairs Committee starts work on supervision proposals

The banking supervision legislation debated in detail in the Economic and Monetary Affairs Committee on Wednesday was rather less warmly received than many other Commission proposals have been. MEPs nonetheless stressed the urgent need for it and pledged to strive to meet their tight deadline, whilst at the same time addressing the major hurdles in the way of strong EU bank supervision.

Exactly two weeks after the Commission unveiled its legislative proposals for tighter eurozone banking supervision, the committee's opening discussion on them pointed to what are likely to be MEPs' key concerns: strong accountability of the supervisor, a clear division of tasks between EU and national levels, including non-eurozone countries, and differing supervision arrangements for different banks.

Practical approach

MEPs broadly recognised the urgent need to reach a deal. "We must accept that we are not working in a vacuum but in a crisis. For this reason we will have to work with what we have on the table", said Marianne Thyssen (EPP,BE), one of the rapporteurs.

The discussion clearly showed that this urgency entails risks. Various MEPs stressed that although the structure must be built quickly, it must not fall apart at the first crisis. "Although we are definitely under time pressure, our main goals must still be met. The system needs to be one which can work", said the second rapporteur, Sven Giegold (Greens, DE).

Other MEPs observed that the timetable set by the Commission was unrealistic and that the Council meetings had already shown this.

Accountability 2.0

All MEPs stressed the need for accountability, to balance the transfer of supervisory powers to the EU. The general feeling was that this accountability should go further than what currently exists at EU level. Empowering Parliament to hold investigations, set the supervisor's budget, appoint its head and ask questions were among the possibilities mentioned.

Mention was also made of possible legal obstacles to achieving effective accountability. On this Mr Giegold commented that "alternatives would need to be looked at" if this were the case.

Dealing with the "outs"

Much time was devoted to the danger that eurozone supervision could result in splitting the single market. This concern  was voiced across the board, not just by MEPs from non-eurozone countries.

Ms Thyssen felt that part of the solution here was a well-designed supervisory board, particularly with regard to its composition and decision-making structures. Mr Giegold also stressed the need to maintain a strong European Banking Authority, to guarantee that there would be only one set of rules on which EU banks operated rather than rules for the "ins" and rules for the "outs".

Other MEPs also stressed the need for strong collaboration between the European Central Bank (ECB) supervisor and national supervisors as a way to address risk.

Nuance to "all banks supervised"

There  was also common ground in the committee on the need for the ECB to supervise different banks differently, whilst at the same time keeping a certain level of EU supervision over all eurozone banks. "It is clear that not all banks should be subject to the same direct supervision by the ECB. However a single supervisory system is still necessary", Ms Thyssen said when rounding up the discussion.

Many MEPs highlighted the need for a very clear demarcation between the ECB's supervisory responsibilities and those of national supervisors. Smaller banks, for example, would have more of their activities supervised by national supervisors, with the ECB keeping an oversight role.

Next steps

A public hearing has been pencilled in for 10 October. The draft reports will then be presented to the committee on 22 October.

Press release

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