The European Union must ensure fair treatment of non-euro area nations that sign up to plans for a single bank supervisor, according to a report released today by EU President Herman Van Rompuy.
The adoption of shared oversight of banks is a “matter of priority,” according to the report, which will be discussed at a meeting of EU leaders next week. The euro area also needs a single authority to handle failing banks, as well as “national deposit guarantee schemes built on common standards.”
The rules underpinning the single supervisor should strike “a balance between rights and obligations for all member states participating in the new supervisory arrangements,” according to the report, which was prepared by Van Rompuy in collaboration with European Central Bank President Mario Draghi, European Commission President Jose Barroso and Luxembourg’s Jean-Claude Juncker, who leads the group of euro-area finance ministers.
Euro-area efforts to pave the way for direct bailouts of banks by its firewall fund have foundered because of concerns that plans to build a single euro-area bank supervisor, based around the European Central Bank, would hurt nations outside the common currency. All 27 EU nations must approve the oversight proposal for it to move forward.
Finance ministers, meeting this week in Luxembourg, acknowledged the EU is unlikely to implement the new supervision regime by the start of 2013 as initially hoped. Any delays mean a longer wait for Spain, which is looking to hand off its financial-sector rescue to the 500 billion-euro ($648 billion) European Stability Mechanism once the new system is in place.
“The crisis has brought about a fragmentation of the euro-area financial market, with adverse implications for credit conditions,” according to the report. “The establishment of an integrated financial framework is necessary.”
The supervisory plan must include an overhaul of voting rules at the European Banking Authority, according to the report.
Procedures at the EBA, which has powers across the entire EU to draft regulations and settle disputes between supervisors, “must be adapted to allow for fair representation and effective decision-making within the single market for financial services,” according to the report.