Landmark EU Parliament – ECB agreement on bank supervision

European Parliament, Economic and Monetary Affairs Committee (ECON) meeting: Towards a genuine economic and monetary union. MEP Marianne Thyssen in the foreground on the left, (European Parliament, Audiovisual Services)

European Parliament, Economic and Monetary Affairs Committee (ECON) meeting: Towards a genuine economic and monetary union. MEP Marianne Thyssen in the foreground on the left, (European Parliament, Audiovisual Services)

In a ground breaking development opening the way to the European Banking Union, the European Parliament and the European Central Bank undersigned the draft text of an Interinstitutional Agreement providing for the exact procedures related to the enactment of the Single Supervisory Mechanism. The legislative had reserves about the transparency and accountability of the SSM to be institutionalised under the authority of ECB.

At the beginning all Eurozone countries are obliged to participate in the EBU and the SSM. ECB will undertake directly the supervision of the 150 systemic banks of the euro area. Every other EU country is free to fully participate accepting of course the entire framework of the Mechanism. In this context the less important banks in all participating countries will continue to be supervised by the national central banks, which will be following standard supervisory practices to be drafted by the European Banking Authority. The ECB would be able to intervene supporting the national central banks in their role. Actually the ECB may at any moment decide to directly supervise one or more of these less important banks to ensure consistent application of high supervisory standards.

Presidents’ agreement

At this point it must be noted that the European Parliament had raised a number of issues over the creation of the SSM related to the democratic legitimisation and the accountability of ECB, in its role as a central supervisor of all euro area’s banks. Seemingly the agreement reached between the Parliament and the ECB yesterday adequately answers the reserves of legislators. To this effect the Presidents of the two institutions, Martin Schulz and Mario Draghi, signed a Declaration covering this uncharted area.

The relevant part of this common Declaration states that the “The draft Interinstitutional Agreement provides in particular for strong parliamentary oversight of the ECB’s supervisory tasks through regular exchanges of views with Parliament’s responsible committee, confidential oral discussions with the Bureau of that committee, and further access to information including to a record of proceedings of the Supervisory Board. ECB cooperation with the European Parliament in the framework of its investigations is also ensured”.

In this quote above there is however a key phrase providing only for “oral discussions with the Bureau”. Obviously this means there will be no minutes held and consequently the members of the Bureau of that Parliamentary Committee wouldn’t be able to refer to what was discussed with the ECB representatives, that is the SSM’s Supervisory Board. This practice comes under a more general conservative attitude of ECB, the Governing Council of which doesn’t release the minutes of its discussions despite strong pressures from the public opinion. Only recently Mario Draghi accepted that the ECB could release just a summary of the Governing Council’s discussion records.

Parliamentary control

However the legislative would have “access to information including to a record of proceedings of the Supervisory Board”. This Board will be the top body of the new and independent SSM department under the roof of ECB, which will undertake the task of supervising Eurozone’s banks. The Chair of the Supervisory Board will be required to appear at regular hearings before Parliament. In addition the Parliament will be involved in the selection procedure of the Chair of the Supervisory Board. On top of that, “ECB cooperation with the European Parliament in the framework of its investigations is also ensured”. Understandably the investigative part of SSM’s workings as supervisor of euro area banks is of crucial importance.

The results of those investigations will be the subject matter on which crucial decisions will be made. More so if the final assessment of ECB will be that the bank in question is ‘beyond limit of repair’. Of course from that point onwards it’s up to the resolution authorit(y)(ies) to decide and place the bank under a resolution process. Unfortunately there is still no agreement about this last stage. The thorny question is whether there will be one single central resolution authority for failing banks presumably under the European Commission with access to adequate funding, or the resolution task will be decentralised to national authorities without access to central funding and probably using varying criteria. Mind you the final decision for the resolution of a bank rests with the resolution authority. In this respect Germany obstinently disagrees with the centralised option.

Nearer to the EBU

In any case yesterday’s agreement between the Parliament and the  ECB is a major step towards the enactment of the European Banking Union. Everybody agrees that the creation of the EBU will mark the second more important step in Eurozone’s history, after the introduction of the common currency. Despite the fact that there was already a deal between the Parliament and the Council over the new system of bank supervision, the legislators and the ECB had to agree “how the ECB supervisor would be democratically accountable and transparent”.

Obviously those reserves by many MEPs are now satisfied. MEPs Marianne Thyssen (EPP, BE) and Sven Giegold (Greens/EFA, DE) steered the two legislative texts in Parliament. Both proposals were adopted with very large majorities.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Von der Leyen announces the start of HERA Incubator to anticipate the threat of coronavirus variants

This 12-year-old built an underwater robot to fight plastic pollution

A 10-step plan to save our seas

5 facts you might not know about why forest biodiversity matters

EU budget 2021: An annual budget focused on European recovery

“Fortress Europe”, “Pegida” and its laughing stocks

Greece returns to markets at a high cost to taxpayers, after four years out in the cold

Ecuador: UN ‘stands ready’ to support talks, in bid to end political turmoil

Civilians ‘must never be a target,’ says UN in Afghanistan, amid troubling number of casualties during Ramadan

How do you make supply chains more visible without compromising security? A Dutch start-up may have the answer

How trade-based money laundering works and its impact on world finances

Disillusioned young people – France thinks it has a solution

UN chief praises Japanese climate resilience, as Typhoon Hagibis cleanup begins

More children killed by unsafe water, than bullets, says UNICEF chief

New research reveals the true extent of corruption in fisheries

We must stop a devastating ‘battle to the end’ in southwest Syria, declares UN envoy

DiscoverEU: 20,000 more young people will explore Europe in 2020

These are the 3 key skill sets workers will need to learn by 2030

UK: Crawley group wins European Citizens’ Prize

Did Draghi ask the Germans to accept a drastic change of austerity policies?

Joint European Union-United States Statement on addressing global steel and aluminum capacity

New General Assembly President brings ‘valuable insights’ into key UN challenges

3 vital skills for the age of disruption

The UN supports Europe’s military action in Libya and the Mediterranean; Russia and China agree

Europe turns out more jobs this summer

COP21 Breaking News_03 December: Europe’s children urge leaders to commit to climate action at UN Climate Summit in Paris

In aftermath of Libya airstrike deaths, UN officials call for refugees and migrants to be freed from detention

CHINA: five letters that could mean…

The world just took a step closer to eradicating polio

‘Harmonized’ plan launched to support millions of Venezuelan refugees and migrants

Here’s what a Korean boy band can teach us about globalization 4.0

Presidents of pan-European youth organisations call upon the European Council to preserve the Schengen principles

5 lessons for the future success of virtual and augmented reality

Germany is the world’s most innovative economy

EU Migrant Crisis: Italian Coast Guard Headquarters and Italian Navy to give host national opening addresses at Border Security 2016 in Rome

United States: UN chief ‘deeply saddened’ by deadly California wildfires

The price of centralization of human resources for health

Denmark is experimenting with ‘culture vitamins’ to lift people out of depression

How banking with blockchain can stamp out corruption and increase financial inclusion

African cities will double in population by 2050. Here are 4 ways to make sure they thrive

Europe bows to Turkey’s rulers, sends Syrian refugees back to chaos

These countries are driving global demand for coal

Bolivia: UN underlines support for ‘credible, transparent and inclusive’ election

Coronavirus: Commission issues guidelines on testing

A letter from Italy: Our insecurity in COVID-19 times

ICC Appeals Chamber acquits former Congolese Vice President Bemba from war crimes charges

The racial wealth gap in the US is affecting its citizens and its economy – this is how

Eurozone set to abandon monetary and incomes austerity and adopt growth friendly policies

Friday’s Daily Brief: human rights in Sudan, sombre anniversaries for Rwanda and Nigeria, and fears of ‘chaos’ in Libya

Business can be profitable AND drive progress on societal priorities

COVID19 a wake-up call to address development fault lines in Asia and the Pacific

EU, Canada and China co-host international meeting on climate cooperation and a sustainable economic recovery

Why building consumer trust is the key to unlocking AI’s true potential

How populist and xenophobic movements in the EU tear apart European businesses and startups

Mergers: Commission opens in-depth investigation into proposed acquisition of GrandVision by EssilorLuxottica

Protecting citizens’ access to social security in case of no-deal Brexit

Amid strong outlook for U.S. economy, risks abound

How can emerging economies navigate the mobility transition?

Vaccine nationalism – and how it could affect us all

Who is culpable in the EU for Ukraine’s defection to Russia?

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s