European Banking Authority and prudential supervision of credit institutions

During the May 2013 Part Session the European Parliament adopted amendments to a first reading agreement reached with the Council on a legislative package establishing a new EU banking supervision legislation. The legislative package consists of a Regulation that puts the European Central Bank (ECB) at the heart of the Single Supervisory Mechanism (SSM) and a Regulation that aligns the working of the European Banking Authority (EBA) with the new supervisory structure.

During the September part session the EP will hold its final vote on this legislative package after having consulted the national parliaments and having obtained the green light from the German Bundestag and Bundesrat, as required by German legislation.

EPP Group rapporteur Marianne Thyssen, responsible for the Single Supervisory Mechanism, underlines the importance of this new legislation as an essential first step towards a banking union, as it will reinforce European integration, restore confidence, make the financial sector stronger and protect the economy and citizens’ savings.

The European Banking Authority (EBA), a coordinating organ, is reinforced and adapted to the ECB becoming the new European supervisor.

Rapid implementation is key for the EPP Group as banking supervision will make it possible to directly capitalise the banks from the European emergency funds. This will put an end to the vicious circle between banks in financial trouble and governments with budgetary difficulties. The SSM will be up and running one year after the adoption of the legislation, i.e. autumn 2014.

 

BACKGROUND INFORMATION

The key elements of the Regulation are:

The ECB plays a key role in the SSM and has final responsibility and the power to intervene in any credit institution in any Member State taking part in the SSM. National supervisors are responsible for banks that cannot create a systemic risk.

The 17 Eurozone Member States will participate in the mechanism. Non-Eurozone Member States can opt in. To encourage Member States from outside the Eurozone to participate in the system, they have been given equal rights in the Supervisory Board. They can also opt out under strict conditions.

The ECB will be subject to strict demands as regards transparency and accountability to the European Parliament when exercising it supervisory tasks. For legal reasons the details of Parliament’s scrutiny powers will be set out in an interinstitutional arrangement which the ECB’s Governing Council is currently hammering out. The ECB’s supervisory tasks will be strictly separated from its monetary tasks.

Julio Añoveros Trías de Bes
Profesor de la Facultad de Derecho de ESADE

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