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Lawmakers Weigh ECB Oversight Incentives for Non-Euro States

Sept. 26 (Bloomberg) -- Plans to hand supervisory powers to the European Central Bank should be overhauled to give countries outside the euro area more incentive to sign up for joint oversight of lenders, European Parliament lawmakers said.

“Above all the system should be so attractive that everyone will want to join,” Sven Giegold, a legislator leading work on the plans, said at a debate in the assembly’s economic and monetary committee today. “What we want to avoid is for member states to feel they have an incentive to stay out.”

EU leaders called for a single supervisor in June as a condition of bailout assistance directly to euro-area banks. Such a mechanism would be designed to decouple government funding to prop up failing lenders, breaking the link between sovereign and banking debt that has been blamed for compounding the crisis.

“What we don’t want to do here is split the EU down the middle, to push the Brits into a corner where they have a referendum where they say ‘you know, thank you, but no,’” said Wolf Klinz, another German member of the Parliament.

Giegold also said that the assembly should seek the power to appoint the head of the ECB’s supervisory arm, and to have some oversight over its budget.

‘Polarization’

Andrea Enria, the chairman of the European Banking Authority, told the Parliament last week that the euro area’s plans to build a banking union will necessitate greater cooperation between regulators to avoid “polarization” between euro and non-euro nations.

While Parliament is only consulted on the ECB supervision plan, it has full power to amend a parallel proposal adjusting rules at the EBA. Lawmakers have said that they will treat the two texts as a package.

Marianne Thyssen, the other EU Parliament lawmaker leading work on the plans, said today the assembly should discuss whether to strive to meet a Jan. 1, 2013 deadline for the supervisor to be in place.

Michel Barnier, the EU’s financial services chief, has said the deadline is “challenging, but realistic.”

Martin Merlin, an aide to Barnier, told the lawmakers that any delay in reaching a decision would be “very badly perceived by the markets.”

‘Extremely Regrettable’

It would be “extremely regrettable if we were still in discussions on these two legislative proposals in the course of 2013,” Merlin said.

German Finance Minister Wolfgang Schaeuble has cautioned against acting hastily to set up the supervisor, saying it will take time to build the “sizeable apparatus” required for the ECB to oversee more than 6,000 euro-area financial institutions. He has also said that banks posing broad risks should move to the new system first.

Some lawmakers today questioned whether the ECB is the right institution to be the single supervisor.

Werner Langen, a German lawmaker in the committee, said that it was wrong, and potentially illegal, to give the ECB far-reaching supervision powers.

“Decision making powers should be with national supervisory authorities” and the European Banking Authority, he said. “The whole European supervisory system is being turned on its head for the sake of Spain, or one Spanish bank.”

To contact the reporter on this story: Jim Brunsden in Brussels at jbrunsden@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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