The European Union cleared a roadblock toward equipping the European Central Bank with oversight powers after finance ministers won German backing after agreeing to weigh changes to the bloc’s rulebook.
Ministers meeting today in Dublin committed to “work constructively” on any treaty alteration proposed by an EU government, according to a declaration released after the gathering. They agreed that the ECB bank oversight law should be amended in the light of any such changes.
“We got the definitive accord of the ministers on the first cornerstone of the banking union,” Michel Barnier, the EU’s financial services commissioner, told reporters.
EU leaders called last year for the ECB to take on oversight powers for euro-area lenders in a bid to untangle the finances of banks and governments. The single supervisor for the euro area is a precondition for banks to get direct aid from the currency area’s firewall fund.
The adoption of the legislation snagged last month on German requests for technical changes to the text and a commitment to consider treaty changes.
The German concerns were that the bloc’s current rules undermine attempts to separate ECB monetary policy-setting from supervisory decisions, and that they make it harder to submit the bank supervisor to democratic oversight.
Nations reached today’s deal after haggling over the wording in the declaration on further work by the EU to build a so-called banking union, with common financial backstops, according to two EU officials, who didn’t want to be named because the talks are private.
Germany sought to scale back the reference to the banking union project in the declaration, compared with early drafts, the officials said.
The final version of the text says that the EU will work for the “urgent completion of all the agreed elements of banking union.”
Barnier said yesterday that he plans to come forward in June with a draft law to endow the euro area with a central authority for dealing with failing banks, backed by a common fund. Like the single supervisor, EU nations that don’t belong to the euro area would be free to sign up if they wished.
While EU leaders last year called for a common resolution authority, they have not yet given similar endorsement to the idea of a common fund.
The EU has already adjusted its treaties as part of its efforts to combat the financial crisis, agreeing targeted changes to allow the setting up of the European Stability Mechanism, a fiscal backstop for euro-area nations.
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