European Union officials are seeking to prevent the 17 states that share the euro from dominating its forum for resolving disputes among financial regulators, the European Banking Authority, according to two people familiar with the plans.
Euro-area leaders agreed in late June that the Frankfurt-based European Central Bank should oversee lenders in the bloc as part of their efforts to quell the debt crisis. European Commission officials drafting a proposal for a common supervisor are concerned that the central bank’s legal independence may allow it to override decisions taken by the EBA, which co-ordinates the work of supervisors in the EU’s 27 member states.
The commission is also weighing changes to the EBA’s voting rules to prevent euro countries from wielding overwhelming influence at the London-based authority, the people said on condition of anonymity because the preparations are private. The commission intends to unveil legislation on creating the single supervisor around Sept. 11.
Handing supervisory responsibilities to the ECB shouldn’t prevent the EU from placing “provisions and limitations” on its new powers, Sharon Bowles, chairwoman of the European Parliament’s Economic and Monetary Affairs Committee, said by e-mail today. “It does not need to be all or nothing.”
The euro area is racing to create a single bank supervisor “involving the ECB” as part of a deal reached at a June 28-29 summit that would allow banks to seek direct aid from the currency union’s bailout funds. It’s one of several steps advocated by leaders including ECB President Mario Draghi to build a banking union that would combine oversight and crisis-management functions.
Under current rules, the independent EBA has the power to rule on disputes between banking regulators that concern interpretations of EU law through a process known as binding mediation.
Officials working on the single-supervisor plan have found this may clash with the ECB’s operational independence, which is guaranteed in EU treaties. This may mean it could overrule or ignore the EBA’s decisions, according to the people. Efforts to find a legal solution are continuing, they said.
Stefaan De Rynck, a spokesman for Michel Barnier, the EU’s financial services chief, declined to comment immediately. Spokespeople for the ECB and EBA declined to comment.
Commission officials working on economic policy and the ECB agree that the central bank should be covered by binding mediation, according to documents obtained by Bloomberg news.
“I only foresee a limited task for EBA, possibly in technical standard setting, if at all,” once the new single supervisor is in place, said Karel Lannoo, chief executive officer of the Centre for European Policy Studies in Brussels.
“We have to accept that the EBA did not have the clout to stand up against the national supervisors and need to take the full consequences of this,” he said.
The U.K. is calling on the commission to avoid a situation in which non-euro countries are covered by mediation decisions that are optional for the ECB, according to the documents, which include EU and U.K. analysis of the policy debate. U.K. authorities have said that such an approach would damage the single market.
The U.K. is also pressing for guarantees that euro states won’t have an automatic majority in the EBA’s decision-making, according to the documents.
Still, it wants national regulators in the currency region to retain individual seats on the EBA’s board of supervisors, according to the documents.
One policy option under consideration in the commission would make the ECB the sole representative of the euro area at EBA meetings, an option preferred by the central bank, an EU official said earlier this month.