The European Parliament is voting in committee this week on the legislation which installs the single supervisory mechanism for Europe's banks. Tricky stuff – especially when certain governments in the Council appear to be backsliding on the banking union, writes Andrew Duff.
Andrew Duff is spokesman on constitutional affairs for the Alliance of Liberals and Democrats for Europe (ALDE).
One key problem for MEPs is how to protect the independence of the ECB in monetary policy while making it politically accountable for its new regulatory functions.
Parliament's Constitutional Affairs Committee (whose rapporteur on the matter is me) wants the Supervisory Board to make proposals to the Governing Council of the ECB in terms of formal draft decisions which the latter would only be able to reject by a two-thirds qualified majority vote. It also wants the Chair of the Supervisory Board to be subject to the approval of Parliament, after a hearing.
Furthermore, we seek to amend the Commission's draft regulation on the ECB with respect to the relationship between euro and non-euro countries. The Commission speaks rather weakly of the need for voluntary 'close cooperation' by the pre-ins.
We want to press all non-eurozone authorities to participate in the single supervisory mechanism. And their participation must be sealed in contractual arrangements backed up by national legislation to extend the regime of the ECB. In return, the non-eurozone states should have equal voting rights on the Supervisory Board with those who have gone before them into the euro.
The Bank of England, of course, is to be exempted from EU supervision unless the UK government can be persuaded to change its mind about banking union. To meet the UK's legitimate insistence that the new regulatory framework does not impair the operation of the single market, the regulation should provide that the ECB can only impose a common policy on participating states when the integrity of EU single market regime is specifically and directly implicated.
Other issues for MEPs concern the transparency of the work of the Supervisory Board and its appearance before the relevant committees of both the European and national parliaments.
AFCO and the lead committee ECON (rapporteur Marianne Thyssen) agree that all banks (and not just the obvious ones) should be embraced in the supervisory mechanism.
The two committees differ on where to put an appellate procedure – with AFCO favouring the EBA rather than the ECB – but not on the need to have one. Again the Commission is weak in this regard.
The European Banking Authority, responsible for the common rule book, needs protection against incursions from the ECB. In the draft report on the EBA (rapporteur Sven Giegold) there is still disagreement about the respective voting rights of the euro and non-euro countries (which in this instance include the UK).
A sensible agreement is necessary which will keep the City of London attached, if only tenuously, to shaping an all-Europe regulatory framework for the whole financial sector. A bad conclusion to this quarrel will drive the UK further off-shore and leave the EU's single supervisory mechanism not so single after all."