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European Commission

MEMO

Brussels, 19 March 2013

An important step towards a real banking union in Europe: Statement by Commissioner Michel Barnier following the trilogue agreement on the creation of the Single Supervisory Mechanism for the eurozone

We have taken an essential step today and I congratulate the European Parliament and the Council for having reached agreement on a major legislative package entrusting the European Central Bank with responsibility for the supervision of banks in the framework of the Single Supervisory Mechanism and adapting the operating rules of the European Banking Authority (EBA) to this new framework. I would in particular like to acknowledge the roles played by the Irish Presidency and of the rapporteurs Marianne Thyssen and Sven Giegold.

This is a first fundamental step towards a real banking union which must restore confidence in the eurozone's banks and ensure the solidity and reliability of the banking sector. This will contribute to strengthening the single market and to guaranteeing financial stability.

The eurozone is at this moment exposed to difficulties. If banking union were already in place and functioning today, the management of these difficulties would be considerably easier. These events strengthen our determination to reform the governance of banks in a meaningful way.

A few weeks after the Economics and Finance Ministers confirmed at their last meeting the terms of the agreement on rules imposing stricter capital requirements for banks (the CRDIV package), we also have agreement on the creation of an objective and impartial European Supervisor, who should be operational as of mid-2014.

But the architecture of banking union does not stop there. We are also working on the establishment of an integrated European resolution system for all countries participating in the banking union. This system will be built on the foundations of the Directive on Banking Resolution for Member States which is due to be adopted shortly.

With today's agreement, a fundamental pillar of banking union has been put in place: I would like to thank the European Parliament whose constructive attitude has allowed an excellent final result to be reached in record time. I am confident that the European Parliament will soon confirm its agreement in a plenary vote. The agreement opens the way to a comprehensive and balanced legislative package, which while granting the European Central Bank responsibility for all banks in the eurozone, establishes a clear division of tasks between national supervisors and the ECB.

In addition, the agreement protects the integrity of the single market, not only because the Single Supervisory Mechanism is open to Member States outside the eurozone, paving the way to an enlarged banking union, but also because it confirms the role of the European Banking Authority by strengthening its powers.

The text agreed by the Parliament and the Council also establishes rules on the governance and responsibility of the European Central Bank which ensures a strict separation between its supervisory tasks and its monetary policy functions. It also foresees appropriate mechanisms to strengthen the democratic responsibility of the ECB for its supervisory activities.

A strong signal of commitment and responsibility has thus been given today by the EU to stabilise the eurozone, strengthen the single market and form a base to kickstart growth.

Background

On 12 September 2012 the Commission adopted two proposals for the establishment of a single supervisory mechanism (SSM) for banks led by the European Central Bank (ECB). The proposal for the SSM regulation aimed to confer upon the ECB specific supervisory tasks over credit institutions in the Euro area. The accompanying proposal for the regulation on the European banking Authority (EBA) aimed to introduce limited amendments to the Regulation setting up the EBA to ensure a balance in its decision making structures between the euro area and non-euro area Member States.

This legislative package followed the Euro area summit on 29 June 2012, which called on the Commission to present proposals for the setting up of a single supervisory mechanism as a precondition for a possible direct recapitalisation of banks by the ESM (European Stability Mechanism).

A unanimous agreement was reached in the ECOFIN Council on 13 December on the Commission's proposal for a Single Supervisory Mechanism. The European Council of 14 December welcomed the agreement reached and called on the co-legislators “to rapidly agree so as to allow its implementation as soon as possible”.

Following intensive trilogue negotiations during January and February, co-legislators reached agreement on the package on 19 March 2013.

Key elements of the SSM:

The establishment of the Single Supervisory Mechanism (SSM) is a first step towards a banking union and one of the pre-conditions for direct recapitalisation by the ESM. An integrated “Banking Union” will also include a common bank resolution mechanism, underpinned by a single rulebook.

  1. The SSM applies to all the euro-area Member States and is open to the participation of other Member States who wish to embark on a path of deeper integration for supervision.

  2. Non-euro area Member States may decide to join the SSM by establishing a close cooperation between their competent authorities and the ECB. In that case they may, on an equal footing with the euro-area Member States, participate in the activities of the newly created Supervisory Board which is in charge of planning and executing the supervisory tasks conferred upon the ECB.

  3. The Regulation confers key supervisory tasks and powers to the ECB over all the credit institutions established within the euro area. The ECB carries out its tasks within a SSM composed of the ECB and national competent authorities.

  4. Within the SSM, the ECB will be responsible for the supervision of all 6000 banks of the euro area. In particular:

  • the ECB shall ensure the coherent and consistent application of the Single rulebook in the euro area.

  • the ECB will directly supervise banks having assets of more than EUR 30 billion or constituting at least 20% of their home country's GDP or which have requested or received direct public financial assistance from the EFSF (European Financial Stability Facility) or the ESM.

  • the ECB will monitor the supervision by national supervisors of less significant banks. The ECB may at any moment decide to directly supervise one or more of these credit institutions to ensure consistent application of high supervisory standards. The work of national supervisors is integrated into the SSM: for instance, the ECB will send instructions to national supervisors, and national supervisors have a duty to notify the ECB of supervisory decisions of material consequence.

  1. The governance structure of the ECB will consist of a separate Supervisory Board supported by steering committee, the ECB Governing Council, and a mediation panel to solve disagreements that may arise between national competent authorities and the Governing Council. Clear separation between the ECB’s monetary tasks and supervisory tasks is fully ensured.

  2. For cross-border banks active both within and outside Member States participating in the SSM, existing home/host supervisor coordination procedures will continue to exist as they do today. To the extent that the ECB has taken over direct supervisory tasks, it will carry out the functions of the home and host authority for all participating Member States.

  3. The rules on the functioning of the EBA will be adapted and its role reinforced. The EBA will continue developing the single rulebook applicable to all 27 Member States. In order to foster consistency and efficiency of supervisory practices across the whole Union, it will develop a single supervisory handbook. It will also ensure that regular stress-test are carried out to assess the resilience of European banks. There will be safeguards for non-euro zone Member States by means of double majority voting requirements for EBA decisions on mediation and on technical standards. This ensures that decisions are backed by both a majority of the participating and the non-participating Member States.

  4. The SSM is envisaged to be in place one year after the entering into force of the agreed texts. To allow for a smooth transition some flexibility by means of transitional arrangements is foreseen.

  5. After agreement on the pending proposals on banking restructuring and resolution and deposit guarantee schemes, as a next step the Commission will make a proposal for a single European resolution mechanism to deal efficiently with cross-border bank resolution and avoid taxpayers' money going into rescuing banks.


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