EU reaches deal on banking supervision

Member states and MEPs agree on specifics of ECB oversight of eurozone banks.

The member states of the European Union have struck a deal with MEPs on handing oversight of eurozone banks to the European Central Bank.

The launch of the single supervisor will allow the European Stability Mechanism (ESM) – the eurozone’s permanent bail-out fund – to recapitalise ailing banks directly instead of having to work through national governments. Michael Noonan, Ireland’s finance minister, said that the deal was “a vital step in breaking the vicious link between the banks and the sovereigns”. 

The deal was made today (19 March) in three-way talks between MEPs, the European Commission and the Council of Ministers, represented by Ireland. It caps months of negotiations on the specifics of the EU’s single supervisory mechanism, a core element of banking union.

The talks today focused on the two main outstanding issues – accountability structures for the ECB when it acts as a banking supervisor as distinct from its monetary-policy role, and voting procedures in the European Banking Authority to ensure that non-eurozone countries have an equal voice. The deal hands the European Parliament greater say in appointing the chair and vice chair of the supervisory board.

Centre-right Marianne Thyssen of Belgium, one of the two lead MEPs on the matter, said that the last hours of negotiations focused on the question of democratic accountability. “What we cannot support is that there is a transfer of competences from national member states to the European level without a transfer of the accountability and the power of the parliaments,” she said. Thyssen said that she was “happy” with the agreement.

Sven Giegold, a German Green who is the other lead negotiator from the Parliament, said: “Member states are ready to share the sovereignty over the supervision of their key banks. This will break with the culture of soft-touch regulation and supervision.”

The agreement leaves in place the division of labour between national and EU-wide supervisors agreed by the member states last year. The ECB will supervise the eurozone banking system as a whole and have direct supervision of banks with assets of more than €30 billion, while national supervisors will continue supervising smaller banks.

Non-eurozone EU countries can choose to enter the single supervisory mechanism when they wish.