Thursday

18th Jan 2018

Ministers agree deal on EU banking union

  • The ECB will start supervising banks in 2014 (Photo: Maciej Janiec)

EU finance ministers have agreed a landmark deal establishing the European Central Bank (ECB) as the single supervisor of the European banking sector, beginning in 2014.

The agreement reached in the early hours of Thursday morning (13 December) is a significant breakthrough as the EU bids to break the link between indebted banks and sovereign bonds nearly five years after the start of the financial crisis.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

It also makes good on an EU leaders' promise to agree on the supervisory framework before the end of 2012.

Ministers will now switch their attention in 2013 to harmonising a deposit guarantee scheme and a resolution mechanism to wind up banks.

Speaking at a press conference following the end of the talks, internal market commissioner Michel Barnier told reporters that ministers had taken "a big first step for banking union," adding that "the ECB will play the pivotal role, there's no ambiguity about that."

German finance minister Wolfgang Schaeuble told reporters: "We have reached the main points to establish a European banking supervisor that should take on its work in 2014."

Delaying the implementation date to 2014 is a blow for member states keen for the ECB to start work immediately. Leaders at the October EU summit had indicated that the so-called Single Supervisory Mechanism (SSM) would come into force in 2013.

Under the final compromise, which is expected to encompass around 150 banks, at least three banks from each member state will fall under the regime alongside all banks with assets worth €30 billion or more or 20 percent of national GDP.

The ECB also has a broad mandate giving it the power to step in to prop up smaller banks. A mediation panel will be created to resolve disputes with national supervisors.

For their part, national supervisors will remain in charge of consumer protection, money laundering and payment services.

Meanwhile, the existing European Banking Authority (EBA) - itself only established in 2010 - will remain responsible for developing the single rulebook and policing implementation of EU supervisory rules.

In a bid to placate German concerns about the independence of the ECB, a special supervisory board will be set up within the bank to separate the bank's monetary policy role from bank supervision. Non-eurozone countries who sign up to the banking union are to have equal voting rights on the supervisory board.

Similarly, the voting system of the EBA will also be revised to ensure that the countries participating in the so-called single supervisory mechanism (SSM) would not dominate the EBA's board of supervisors.

Ministers agreed that a 'double majority' of countries both in and outside the eurozone would be required to make decisions. The board's draft decisions would be deemed adopted unless rejected by the ECB governing council.

Some key questions remain unresolved, however.

Ministers did not reach a conclusion on the timetable for the European Stability Mechanism - the permanent eurozone bailout fund - to begin direct recapitalization of eurozone banks.

Although Spain and other countries would like bank bailouts to begin in early 2013, Germany is against this happening before the supervisory regime is in place and fully operational.

For his part, finance minister Vassos Shiarly, from EU presidency country Cyprus, described the SSM deal as a "magnificent result" and a "Christmas present for the whole of Europe," adding that it would "enable the vicious link between banks and sovereigns to be broken."

He told reporters that formal "trialogue" negotiations would begin next week with MEPs led by Belgian centre-right deputy Marianne Thyssen and German Green Sven Giegold.

Draghi seeks to allay German concerns on banking union

European Central Bank chief Mario Draghi sought to downplay a clash of views with the German government over the scope of a new banking supervisor by suggesting a bigger role for national supervisors when it comes to small regional banks.

Franco-German rift derails banking union deal

EU finance ministers will return to Brussels on the eve of the December EU summit next week for last ditch talks on the controversial banking union proposals, after failing to reach agreement on Tuesday.

EU summit lays out next steps for banking union

EU leaders have agreed to take further steps towards banking union including the legal minefield of how to wind up ailing banks and make sure the tax payer does not foot the bill.

Hungary to tax NGOs that 'help' migration

Ahead of elections in April, Hungary's government swings into campaign mode by proposing a new set of rules to stop illegal migration and NGOs that assist in it.

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Solutions for Sustainable Cities: New Grants Awarded for Branding Projects
  2. Mission of China to the EUTrade Between China, Belt and Road Countries up 15%
  3. Nordic Council of MinistersOresund Inspires Other EU Border Regions to Work Together to Generate Growth
  4. Mission of China to the EUTrade Between China, Belt and Road Countries up 15%
  5. AJC Transatlantic InstituteAJC Calls on EU to Sanction Iran’s Revolutionary Guards, Expel Ambassadors
  6. Dialogue PlatformRoundtable on "Political Islam, Civil Islam and The West" 31 January
  7. ILGA EuropeFreedom of Movement and Same-Sex Couples in Romania – Case Update!
  8. EU2017EEEstonia Completes First EU Presidency, Introduced New Topics to the Agenda
  9. Bio-Based IndustriesLeading the Transition Towards a Post-Petroleum Society
  10. ACCAWelcomes the Start of the New Bulgarian Presidency
  11. Mission of China to the EUPremier Li and President Tusk Stress Importance of Ties at ASEM Summit
  12. EU2017EEVAT on Electronic Commerce: New Rules Adopted

Latest News

  1. EU 'hypocrisy' condemns people to Libya, says NGO
  2. Next year's EU election at risk of Russian meddling
  3. Hungary to tax NGOs that 'help' migration
  4. Cyprus, Malta, and Russia gang up on whistleblower
  5. 'No backsliding' on Brexit promise, Irish PM warns
  6. Commission and council dig in on GMO opt-outs
  7. Ombudsman asks ECB chief to quit secret bankers group
  8. Polish Nazi-jibe MEP 'spams' EU inboxes

Stakeholders' Highlights

  1. European Jewish CongressChair of EU Parliament Working Group on Antisemitism Condemns Wave of Attacks
  2. Counter BalanceA New Study Challenges the Infrastructure Mega Corridors Agenda
  3. Dialogue PlatformThe Gülen Community: Who to Believe - Politicians or Actions?" by Thomas Michel
  4. Plastics Recyclers Europe65% Plastics Recycling Rate Attainable by 2025 New Study Shows
  5. European Heart NetworkCommissioner Andriukaitis' Address to EHN on the Occasion of Its 25th Anniversary
  6. ACCACFOs Risk Losing Relevance If They Do Not Embrace Technology
  7. UNICEFMake the Digital World Safer for Children & Increase Access for the Most Disadvantaged
  8. European Jewish CongressWelcomes Recognition of Jerusalem as the Capital of Israel and Calls on EU States to Follow Suit
  9. Mission of China to the EUChina and EU Boost Innovation Cooperation Under Horizon 2020
  10. European Gaming & Betting AssociationJuncker’s "Political" Commission Leaves Gambling Reforms to the Court
  11. AJC Transatlantic InstituteAJC Applauds U.S. Recognition of Jerusalem as Israel’s Capital City
  12. EU2017EEEU Telecom Ministers Reached an Agreement on the 5G Roadmap