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The issue flared up after German, Finnish and Dutch finance ministers said that so-called “legacy assets” – such as old bank debt – should remain “under the responsibility of national authorities” with the bailout fund taking “direct responsibility” for problems occurring under the new supervision regime.
The Government and the European Commission dismissed this view, insisting that the Republic would secure financial benefit based on a June agreement of eurozone leaders which promised to “break the vicious circle between sovereign and banking debt”. Irish officials said the EU leaders’ statement, promising to look again at the sustainability of Ireland’s reform programme, took political precedence over the views of three EU finance ministers.
The Berlin finance ministry had hoped to shift oversight responsibility from its national regulator, BaFin, to the ECB using a special provision of European treaties that allow such transfers of additional competences. However, an analysis by the Bundestag’s legal service has raised doubts about the legality of such a move.