BRUSSELS (MNI) – The European Central Bank is prepared to submit
itself to mediation by the European Banking Authority on the same level
as national supervisors, ECB Vice-President Vitor Constancio told EU
finance ministers Tuesday.

The ECB’s position could help allay one of the main concerns of the
UK and other EU countries which don’t use the euro currency, which is
that the EBA does not currently have the power to impose its decisions
on how EU banking rules should be applied on the ECB.

EU lawmakers are working to finalise legislation that would make
the ECB the ultimate supervisory authority of banks in the Eurozone by
the end of the year, as part of a first step towards a wider vision of
creating a “banking union” to complement the Eurozone’s economic and
monetary union.

An effective single supervisory mechanism for Eurozone banks is
also a necessary condition for the Eurozone’s bailout fund, the European
Stability Mechanism, to start directly recapitalising struggling banks,
a move that could help break the dependence of weak banks on
heavily-indebted governments.

Although the ECB’s position could help smooth over one major
obstacle towards a deal before the end of the year, other issues remain.
These include the scope of the ECB’s powers, and how non-Eurozone
countries that wish to subject themselves to ECB oversight could
participate in its decision making without violating treaty provisions
that give ultimate authority to the ECB’s governing council.

A compromise proposal that would see the ECB’s governing council
approve supervisory decisions without having to vote on them and that
would limit its power to intervene to a “Yes” or a “No” would be
acceptable to the ECB, Constancio said.

Whether it would pacify critics, including Sweden and Poland,
however, remains unclear.

Ensuring an adequate separation between the ECB’s new oversight
responsibilities and its monetary policy role is also an issue where
more could be done, EU Internal Markets Commissioner Michel Barnier told
the EU finance ministers.

Although EU leaders have committed themselves to finalising the
rules in less than two-months’ time, Austria’s finance minister Maria
Fekter cautioned against rushing things and questioned whether treaty
change might not be a better solution.

“Speed kills when we dont have the best solution,” she said.

–Brussels Newsroom, +324-952-28374; pkoh@mni-news.com

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