Even though the approach of German elections was clearly hindering any decision making, discussions on banking union continued behind the scenes during the Eurogroup and EcoFin meetings in Vilnius last weekend. When passed in review, the agenda for the banking union points that making decisions cannot be put off much longer.
Time is running out
Indeed, it is high time to finish adopting the main mechanisms necessary before the current legislature ends and European elections are held in June 2014. Clearly, banking union is caught between the German and European electoral calendars. In this respect, we should not forget how painstakingly slow the European decision making process can be. We have become accustomed to the delays imposed by negotiations between the European Commission and the Council, and often even within the Council. But now we must also take into account the European Parliament. A good example is the adoption of the Single Supervision Mechanism (SSM), which the European Central Bank (ECB) is about to back. Over a year passed between the announcement of the mechanism’s creation (June 2012), the European Commission’s publication of draft regulations (September 2012), the agreement between heads of state on the overall characteristics of the mechanism (December 2012) and the European Parliament’s final vote (September 2013). The European Parliament requested to be granted a democratic control over the ECB’s future supervisory mission. Long debate dragged on over the summer, and it was only last week that an agreement was finally reached and adopted by parliamentary vote.
The regulation stipulates that the Single Supervision Mechanism will become fully operational a year after the regulation takes effect, which means in Q4 2014. At that time, the European Central Bank will become the direct supervisor of the eurozone’s largest banks: the three largest banks of each country participating in the system, as well as all banks with more than €30bn in assets or whose balance sheet is above 20% of their home country’s GDP2. It will also take direct charge of any banks receiving direct financial support from the European Financial Stability Fund (EFSF) or the European Stability Mechanism (ESM). More generally, the ECB will be entitled to oversee directly any bank whose situation is according to the central bank a risk to financial stability.
BY Frédérique CERISIER
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