A meeting of European Union (EU) leaders resulted in agreement that the European Central Bank (ECB) will be at the head of a framework of eurozone bank supervision, and that the structure will be in place by the beginning of 2013.
Bloomberg reported Friday that at the summit meeting in Brussels, leaders committed to having a eurozone bank supervisor in place by the end of the year. With an end goal of cutting ties between the banks and governments at the heart of the crisis, the supervisor is intended to be operational on Jan. 1 and phase in supervision over the year, so that by the first day of 2014 it could preside over all 6,000 eurozone banks.
EU President Herman Van Rompuy said after the meeting that the new supervisor will “probably be effectively operational” and thus allow the European Stability Mechanism (ESM) bailout fund to begin lending directly to banks as early as 2013, He added that finance ministers would be putting together rules to govern those bank bailouts.
Chancellor Angela Merkel of Germany, who has been advocating a slow implementation of such a supervisor, was quoted saying that before banks get assistance directly from the bailout fund, the system of bank supervision has to reach “practical completion.” In the report she said, “Our goal is banking supervision that’s worthy of the name, because we want to create something that’s better than what we currently have.”
EU leaders have said that a “single resolution mechanism” will be considered for countries participating in the eurozone bank supervisor, once they have completed work on proposals already under consideration that apply to all 27 EU countries.
Van Rompuy commented in the report that “other steps also need to be taken quickly, starting with harmonization of national resolution and deposit guarantee schemes.” EU Financial Services Commissioner Michel Barnier has already begun work on strengthening policies that govern bank shutdowns throughout the eurozone and boost national deposit guarantee plans.
Economist Carsten Brzeski at ING Groep in Brussels said in the report that the “integration pace remains slow.” He was quoted saying, “All in all, the new single supervisory mechanism will come, but direct bank recapitalization looks very unlikely any time soon.”
He added, “Moreover, all other big-picture issues for deeper eurozone integration remain schematic. Last night’s marathon session again illustrated how cumbersome and difficult the European decisionmaking process is.”