EP gives final go ahead to European banking supervision

The European Parliament gave its final green light to a legislative package establishing stricter banking supervision. By the end of next year, the Single Supervisory Mechanism for the banking sector should be fully operational. This completes the first pillar of the so-called Banking Union.

The European Central Bank (ECB) will be at the heart of the new European supervisory structure and will directly oversee all banks that can create systemic risks. In addition, the ECB will give guidance to national supervisors and has powers to intervene in any other credit institution in Member States participating in the supervisory mechanism.

Marianne Thyssen MEP, Rapporteur on the Regulation that establishes a Single Supervisory Mechanism (SSM) for the banking sector, underlined the importance of a strict democratic control over the ECB as the new banking supervisor: “The European Parliament has ensured that a tight system of accountability of the ECB towards the EP is included in the Regulation, the details of which are set out in an interinstitutional agreement between the Parliament and the ECB. The EP will have the right to ask questions and organise hearings. In addition, the EP will have a major role in appointing or removing the Chairman and Vice-Chairs of the Supervisory Board, as well as extensive enquiry rights.”

The key elements of the legislative package adopted today are:

• A new single European supervisory system will be established in which the European Central Bank (ECB) plays a key role and national watchdogs are closely involved. The ECB has final responsibility and the power, if necessary, to intervene in any credit institution in any Member State taking part in the Single Supervisory Mechanism;
• The 17 Eurozone Member States will participate in the mechanism. Non-Eurozone Member States can opt in. To encourage Member States from outside the Eurozone to participate in the system, they have been given equal rights on the Supervisory Board, the organ within the ECB in charge of banking supervision;
• The ECB will be subject to strict demands as regards transparency and accountability to the European Parliament and Council when exercising its supervisory tasks;
• The ECB's supervisory tasks will be strictly separated from its monetary tasks – a key demand of the EP;
• The European Banking Authority, a coordinating organ, will be reinforced and adapted to the ECB being the new European supervisor. Non-Eurozone Member States can opt in to the supervisory structure; this prevents a two-speed system and thus reinforces the internal market.

Marianne Thyssen concluded: “The legislation we have adopted today is an important step towards safer banking across the EU. It will restore confidence with citizens and companies and make sustainable economic growth and new jobs possible. Moreover, strong European supervision will make it possible to directly capitalise banks from the European Stability Mechanism, thereby putting an end to the vicious circle between banks in financial trouble and public finances.”