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ECB May Limit Governing Council Oversight Powers, Document Shows

The European Central Bank could limit the powers of its Governing Council as a way to reassure non-euro nations who might sign up to common banking oversight, according to a Dec. 9 opinion from the ECB and the European Commission.

The balance of ECB power has been a key obstacle for finance ministers trying to reach a deal this month on a single supervisor for banks. The ministers meet again today in Brussels. The Dec. 9 document shows renewed efforts to separate the ECB’s monetary-policy and supervisory functions, while also reassuring non-euro countries that they could get a fair shake in banking decisions.

The ECB’s Governing Council would need to state monetary- policy concerns in order to object, in writing, to bank- oversight decisions. The ECB would have a separate supervisory board that would operate “under the largest degree of autonomy permissible” under European Union treaties, according to the document, which was obtained by Bloomberg News.

The Frankfurt-based ECB is due to take over financial supervision throughout the euro area next year, as part of EU efforts to break links between banking woes and sovereign-debt struggles. Joint bank supervision would be required for nations that use the euro and optional for countries outside the currency bloc.

Non-euro nations could be allowed to object to ECB supervisory decisions under some circumstances, the draft document shows. For example, they could be allowed to object to Governing Council instructions without being obliged to drop out of the common bank supervision, the document says.

Draft Decision

Also, non-euro nations could inform the ECB’s Governing Council of its disagreement with a draft decision by the Supervisory Board and request a review. The Dec. 9 document further proposes that nations outside the currency zone could be present in discussions among euro countries when supervision matters are on the agenda.

“This setup would provide for strong governance arrangements which could be enhanced in the future following a treaty revision, if deemed required,” the Dec. 9 document says. The report says nations could signal “that a specific point to be addressed by treaty change would be to strengthen democratic accountability over the ECB insofar as it acts as a banking supervisor” as they establish the new oversight regime.

To contact the reporters on this story: Rebecca Christie in Brussels at rchristie4@bloomberg.net; Jim Brunsden in Brussels at jbrunsden@bloomberg.net.

To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net;

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