BRUSSELS (MNI) – The Eurozone’s top banking supervisor is to be
chosen from among the European Central Bank’s existing Governing Council
members, according to draft legislation prepared by the European
Commission.

In order to ensure a separation between the ECB’s monetary policy
role and new supervisory powers over banks across the Eurozone, the
Commission has proposed the creation of an ECB Supervisory Board to be
chaired by a member of the central bank’s Governing Council for a
five-year, non-renewable term of office. A vice-chair for the new
supervisory body within the ECB would also be elected from among
existing Governing Council members, a draft of the text shows.

The Supervisory Board will also be composed of “four
representatives of the ECB, appointed by the Executive Board, and one
representative of the national authority competent for the supervision
of credit institutions in each participating member state,” the document
states.

A representative from the Commission and the European Banking
Authority will also participate in meetings as observers.

Under the Commission’s proposal, which must secure the unanimous
approval of all Eurozone governments to become law, the new ECB
Supervisory Board would gain far-reaching powers for all the Eurozone’s
6000 banks by 2014.

Direct supervision of nationalised banks would start in January
2013 and extended to all systemically important banks by July.

Banks in EU countries that do not use the euro, could also
opt to submit themeless to ECB supervision, according to the plan.

The Commission’s proposal to extend the ECB’s supervisory mandate
to all banks in the Eurozone, will face opposition from the currency
bloc’s biggest member, Germany, which wants to limit the ECB’s role to
only systemically important institutions.

In a move that is likely to upset the UK, the Commission’s proposal
calls on the ECB to “coordinate a common position” among its members
when voting on relevant issues at the European Banking Authority on
matters within its competence. The measure could give the ECB the power
to unilaterally set certain rules for all the EU’s 27 member states on
rules where only a simple majority is required.

–Brussels Newsroom, pkoh@marketnews.com; +324-952-28374
[TOPICS: M$G$$$,M$$CR$,M$X$$$,M$B$$$,MT$$$$,M$$EC$]