Deutsche Bank: Political compromise on banking union - Two up, three down!

25 March 2013

European Parliament, Council and Commission have reached a compromise on the legal texts required to set up EU Banking Union, making the start of the EU supervisory mechanism possible by mid-2014.

On the positive side, the EP managed to strengthen (i) the ECB’s accountability vis-à-vis parliaments and (ii) the position of the European Banking Authority (EBA) vis-à-vis the ECB, which will help the EBA in its mandate to preserve the Single Market.

On the negative side, (i) the compromise effectively establishes a bifurcated supervisory structure in the EU, as the ECB will only be able to claim authority over small and mid-sized banks in exceptional circumstances – competitive distortions beckon; (ii) non-euro countries that decide to join the EU-level supervisory mechanism have been granted a right to exit, which is a dangerous novelty and precedent in European integration and EU legislation and could be a slippery slope to exit clauses in other pieces of legislation; (iii) even banks under ECB supervision will be allowed to refrain from adopting IFRS (if they haven’t done so to date) – thus, comparing EU banks will still be difficult, if not impossible, at least until the ECB enforces comparability by means of statistical requirements.

Full press release

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