Speaking in the wake of a finance ministers meeting in Brussels yesterday (10 July), Barnier said the plans will be finalised by the beginning of September with a view to implementation by the end of the year.
But not all member states will want to be part of it, Barnier said, without naming Britain.
“We feel the need to include all 27 members states, though there will be some who wish to opt out for those countries who do not wish to be in banking union immediately,” he said on the geographic scope of the union.
How many banks will fall under the new supervisor?
The size of banks that will fall under the supervision of a single authority is another key issue under consideration, the Commissioner said, explaining that the possible scope could range from including only systemic, major banks, to all the banks in Europe.
“Some banks such as [Belgium's] Dexia and [Spain's] Bankia would not fall into the category for inclusion as one of Europe’s 15 systemic banks," he said. "Yet these banks have had problems, so our approach is to make sure that banks will be covered in a similar way to that applied in the Basel III [financial] regulations,” he added.
The Basel rules affect a very wide range of banks, including some of Europe’s smallest. For example, capital requirements rules currently being introduced to comply with Basel are estimated to affect 8,400 European banks.
It remains unclear whether the proposals to be drawn up by the Commission will mean that Germany’s Landesbanken and Spain’s regional savings banks, or cajas, would be covered by the new supervision regime.
Rehn squashes rumours of recapitalisation retreat
Barnier also touched on the political effect that such a powerful new supervision body would have, saying that “somewhere the [European Central Bank] should be placed in framework for democracy”.
The role of the European Banking Authority, the London-based regulator, will also be thorny, Barnier said, explaining that a “strong structural link” would be required between the EBA and the ECB.
Meanwhile, Economic and Monetary Affairs Commissioner Olli Rehn used the same briefing to rebut reports that ministers left the issue of recapitalisation of Spanish banks through the European Stability Mechanism unclear following the summit of heads and state and government on 29 June.
Quizzed by reporters as to whether there was any doubt that such a scheme would still require Spain to take sovereign risk on board, Rehn was clear.
"Once a single supervisory mechanism is in place and operational, and the ESM has adopted an instrument for direct bank recapitalisation, there will be no need for a sovereign guarantee for banks being recapitalised directly," he said.