EP strengthens transparency and accountability of single banking supervisor

On 12 September 2013 the European Parliament approved a single supervisory mechanism (SSM) for EU banks. MEPs voted on two legislative texts concerning the European Commission’s proposal to establish the SSM (EP’s consultation was required) and the amended role of the European Banking Authority (EBA) in the new supervisory structure. The Presidents of EP and ECB also declared their full support for the draft text of the Interinstitutional Agreement on practical aspects of their cooperation in order to strengthen the parliamentary oversight of the supervisor and its accountability, which has been negotiated between both institutions.

Proposal for a single supervisor

The first step towards the banking union was the commitment made by EU Heads of State and Government in June 2012. On 12 September 2012 the Commission proposed an SSM for banks led by the European Central Bank (ECB). SSM is the first of three elements of the EU banking union, the other two being joint deposit guarantee and banking resolution mechanisms. It was initially envisaged that the ECB would supervise all banks in participating Member States (MS), giving the non-euro MS the possibility to opt in if they complied with ECB rules. The legislative package also included a proposal for a regulation which tasked the EBA with preparing a single supervisory handbook for national authorities and changed the balance in its decision making structure between the euro area and non-euro area Member States to avoid outvoting of the latter by the former.

Negotiations

During the negotiations between the co-legislators it was agreed that the ECB would directly supervise Eurozone banks having assets greater than €30 billion or constituting at least 20% of their home country’s GDP (approximately up to 150 of the biggest banks in total). Smaller banks will be monitored via national supervising authorities. The EBA will ensure that regular stress tests of balance sheets and asset quality are conducted to assess the resilience of the EU banking sector. On 19 March 2013 a trilogue agreement was reached on the two legislative proposals. It ensures that the ECB´s monetary and supervisory roles are strictly separated. The ECB is due to take up its supervisory roles in a year’s time.

Democratic transparency and accountability

As the new system requires a significant transfer of bank supervisory powers from national to EU level, the MEPs and some national parliaments demanded that adequate democratic control of the new supervisor is ensured. EP’s report on establishment of the SSM and text agreed in trilogue paved the way for an Interinstitutional Agreement on cooperation and parliamentary oversight to be negotiated by EP and ECB.

The agreement between EP and ECB

Negotiations between the EP and the ECB on the text of that Interinstitutional Agreement were concluded at the beginning of September. The Agreement achieved means that the EP will have an extensive access to information: most notably the ECB will provide the EP’s competent Committee with a “comprehensive and meaningful record of proceedings of the Supervisory Board that enables an understanding of the discussions, including an annotated list of decisions”. Furthermore, the Chair of the Supervisory Board will be required to participate in parliamentary hearings on request of the competent Committee of the EP and if necessary in the confidential meetings with the Committee’s Chair and Vice-Chairs. The EP will also have the right to investigate possible errors by the supervisor and the individual MEPs will have the possibility to question the supervisor in writing. Parliament jointly with Council will have the right to approve the Chair and Vice-Chair of the Supervisory Board and to request their removal. The Presidents of EP and ECB endorsed the agreement in the joint declaration and called for its formal adoption as soon as possible.