Ministers restrict EU bank supervision [de] [fr]
EU countries have agreed to impose restrictions on the powers of new EU bank supervisors, it emerged after extended talks ended yesterday (13 July).
Background
EU leaders agreed in June 2009 on the main issues concerning financial supervision and gave the European Commission a mandate to propose a solution for burden-sharing cross-border banks' rescue plans (EurActiv 19/06/09).
The Commission drafted two proposals for financial supervision: a European Systemic Risk Board for macro-prudential supervision (ESRB) and European Supervisory Authorities (ESAs) for micro-prudential supervision.
The ESAs would be divided into three sub-groups to oversee different kinds of financial institution: the European Banking Authority (EBA), the European Securities and Market Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA).
The three new financial watchdogs created by the European Commission can overrule their national counterparts only if there is a breach of EU law, UK Chancellor of the Exchequer George Osborne told reporters after talks between finance ministers yesterday.
The UK has insisted from the outset that the supervisory trio should not impinge on their fiscal sovereignty, a view that has hampered ministers' negotiations, say EU sources.
Yesterday's outcome comes on the back of a compromise brokered by the Belgian EU Presidency which takes into account British resistance to having their financial regulator overruled by an EU watchdog.
The compromise will allow the new European Supervisory Authority (ESA) to override the regulator if there has been a breach of EU law, Osborne told reporters at a briefing.
"We have restricted the areas of crisis intervention and mediation to areas where the national authority is breaking European law," the chancellor said.
"We made it clear we do not want the ESA to question the discretion of the regulator or affect the day to day supervision of firms," he added.
The watchdogs are under pressure to become operational by January 2011 as they are also due to supervise credit rating agencies.
However, the draft package remains null and void without a green light from the European Parliament.
Last week's vote on financial supervision was postponed until September to buy the Belgian Presidency more time and wait for the ministers' agreement.
Green MEPs are not happy with yesterday's outcome as they would rather see the ESAs overrule the regulator or resolve disagreements between national supervisors where they see fit.
The Parliament's special envoy on the new European Banking Authority, Spanish centre-right MEP José Manuel Garcia Margallo Y Marfil (European People's Party), welcomed the ministers' agreement as "a very big step forward".
Frankfurt vs. London
In addition, the ministers decided that the European Banking Authority should be seated in London, a point that will likely rile MEPs who want the trio of watchdogs to reside in Frankfurt, close to the headquarters of the European Central Bank.
"From a [British] perspective, I think it is significant that attempts to move the banking authority to Frankfurt [...] have been resisted," Osborne said.
"It is sexy to say where the European authorities will be seated, but for me that is not an issue," Garcia Margallo Y Marfil added.
Waiting for stress tests
The ministers' talks also encapsulated the looming results of bank stress tests, which are due to be published on 23 July. The stress tests will show how much banks would lose if the economy were to worsen, financial market conditions deteriorate and borrowing costs soar.
EU regulators have subjected a total of 91 banks to stress tests to examine how they would fare under a 3% drop in GDP and double-digit losses on sovereign debt markets (EurActiv 12/07/10).
According to Belgian Finance Minister Didier Reynders, regulators, co-ordinated by the Committee of European Banking Supervisors (CEBS), will publish the overall results on 23 July, followed by a "breakdown of data" in early August.
A spokesperson from the European Commission explained yesterday that the results to be published later were not part of the CEBS exercise. They are instead the results of separate stress tests carried out by supervisors on banks' foreign subsidiaries.
"In order not to mix the different exercises, it was agreed that the supervisory authorities wishing to disclose the results of stress tests done on foreign subsidiaries will not do so until two weeks after the release of the CEBS results, on 23 July," the spokesperson added.
Earlier this week, the EU's economy chief, Olli Rehn, called for EU governments to prepare financial help for vulnerable banks.
Next Steps
- 23 July: Bank stress test results to be published.
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