Brussels wants all eurozone banks under ECB watch

Michel Barnier July 2012.JPG

The European Commission plans to give the European Central Bank (ECB) oversight of all banks in the eurozone from 2014, said Michel Barnier, in charge of the internal market at the EU executive.

Under the plans, the ECB will oversee all banks that have tapped the European Stability Mechanism from January next year, Barnier told German newspaper Sueddeutsche Zeitung.

All banks relevant to the financial system would be covered from July and all remaining banks from 2014, Barnier further told the paper in an interview.

Countries outside the eurozone can subject their banks to the oversight of the ECB voluntarily, said the commissioner.

Austria supportive, Germany reserved

The plans are in line with demands from the Austrian financial regulator, who said on Thursday (30 August) that the ECB should take charge not only of banks considered vital for the banking system.

But Germany believes the proposal would go too far and that only larger, so-called systemic banks should be covered. Wolfgang Schäuble, German finance minister, wrote in the Financial Times that giving the ECB power over only large banks is "common sense" as it would be impossible for it to oversee all of them.

Barnier disagrees, telling the Suddeutsche that Dexia, Northern Rock and Bankia would not have fallen under a large-bank regime.

The geographical scope and the size of banks covered are key issues to be considered in the blueprint for a European banking union, which Barnier is due to submit in September (>> Read EURACTIV's complete coverage on banking union).

Eurozone leaders agreed in June to set up a single banking supervisor for Europe centred around the ECB, a plan they hope will help break the "vicious" link between the eurozone's debt crisis and struggling banks. They said a blueprint was urgently required for banking integration (>> Read full statement).

Details have yet to be agreed about how the ECB will work with local regulators in individual countries and with the existing European Banking Authority, the pan-EU watchdog.

The European Commission will present a detailed proposal on 12 September for that supervisor.

EU leaders agreed at the last EU summit in June that a blueprint for banking integration was urgently required to break the link between bad banks and indebted governments, with the worsening situation in Spain an immediate concern.

The proposal should include details to set out a single European banking supervisor, a common EU deposit-guarantee scheme and a single bank-resolution fund to wind down the region's bad bank.

  • 12 Sept.: European Commission expected to present banking union plans.
  • 13-14 Dec.: EU leaders could adopt the plan at regular December summit meeting.
  • Jan. 2013: If the rules are adopted, the European banking supervisor could start operation.

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