Internal Market Commissioner Michel Barnier wants the European Central Bank (ECB) to be installed as a central regulator for the proposed union in January 2013, with banks to start falling under its supervision from June next year.
The Commission’s “ambitious” target (see background) is “possible and necessary”, Barnier told journalists mid way through the informal meeting in Nicosia.
Germany wants slower timetable
German Finance Minister Wolfgang Schäuble led a move to slow the timetable down, however. Germany would prefer a gradual phase-in of supervision for its powerful local Landesbanken, which offer German municipalities vital credit lines.
“We strongly request that stress tests be conducted before the banks falling into the systemic risk category are transferred from the national supervisor to the EBC,” Schäuble told journalists after the meeting.
Another German concern is that the new supervisory mechanism must not merely be in place, but also “fully effective”, before the rescue fund, the European Stability Mechanism (ESM), can start to inject cash directly into the continent’s ailing banks.
Schäuble received the backing of Sweden, the Netherlands and Poland in his call to ease the timetable during the meeting.
The Dutch finance minister, Jan Kees de Jager, told ministers that the new machinery would have to demonstrate “a track record” before the ESM can be tapped.
France wants fast-track banking union
Meanwhile France led a caucus of member states which want the Commission’s swift timetable to be kept on track, supported by others – including Belgium, Italy and Spain – which would like to see the ESM lifeline in place as a soon as possible.
“We need to stick to the timetable,” Spanish Finance Minister Luis De Guindos told reporters.
French Finance Minister Pierre Moscovici said the gap in time between the implementation of the new machinery and the release of the ESM funds “should not be an ocean”.
After the meeting, Swedish Finance Minister Anders Borg said Sweden, which is not part of the eurozone, cannot join the supervisory mechanism as the draft proposal stands.
Hot autumn of negotiations ahead
Borg said the wording of the draft rules fails to protect the interests of non-eurozone countries that wish to co-operate with the new supervisor, granting the ECB too much power over their national supervisors.
The meeting paves the way for “a very tough autumn with a lot of very hard negotiations ahead”, Borg said. He added that other non-eurozone countries voiced similar concerns in the meeting.
Britain, which favours banking union but does not wish to participate in it, kept a low profile at the meeting. Chancellor of the Exchequer George Osborne reiterated the British line that the banking union “must also respect the integrity of the single market for the whole of the European Union”.
UK officials are working on proposed compromise wording that would protect the position of the European Banking Authority in any dispute that might arise between it and the ECB.
