EU Flash: Bank supervision, Bank capital requirements (Weekly Update 15-19/04/13)

19/04/2013

Council confirms agreement with European Parliament on bank supervision

The Permanent Representatives Committee (Coreper) approved, on 18 April, a compromise agreed with the European Parliament on the establishment of a single supervisory mechanism (SSM) for the oversight of credit institutions.

The SSM will be composed of the ECB and the supervisory authorities in the member states. The ECB will be responsible for the overall functioning of the SSM. It will have direct oversight of Eurozone banks, although in a differentiated way and in close cooperation with national supervisory authorities. Non-Eurozone member states wishing to participate in the SSM will be able to do so by entering into close cooperation arrangements.

At an informal meeting of ministers and central bank governors in Dublin on 12 April, the member states agreed on a political declaration accompanying the ECB regulation, stating that they are "ready to work constructively on a proposal for treaty change" and that the ECB regulation should be appropriately adjusted, if necessary, should article 127 paragraph 6 TFEU or other relevant treaty provisions be amended. Member states also reaffirmed "their commitment to the urgent completion of all the agreed elements of banking union, as set out by the European Council, in particular in its conclusions of 13/14 December 2012."

The ECB will assume its supervisory tasks within the SSM either on 1 March 2014 or 12 months after entry into force of the legislation, whichever is later, subject to operational arrangements.

Following the approval of the legislation by the Coreper, a letter will be sent to the chair of the Parliament's "ECON" committee confirming the Council's agreement on the EBA regulation and informing the chair that it has also endorsed the amending regulation on the ECB. If the Parliament votes accordingly and in particular approves the EBA text as agreed, the Council will approve both texts without further discussion. The presidency confirmed that following finalisation of the two regulations in all languages, it will submit them together for final adoption as a package.

The full press release can be found here: http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ecofin/136846.pdf

European Parliament plenary agreement on bank capital requirements (CRDIV/CRR)

The European Parliament adopted, on 17 April, the compromises previously agreed with the Council over the final shape of Capital Requirements Regulation and Directive (CRR/CRD IV). The Parliament aims for an entry into force of the new regime on 1 January 2014, once the Council has formally given its approval.

The new legislation consists of two instruments governing capital requirements for investment firms and credit institutions, including banks.

The Capital Requirements Regulation (CRR), a new instrument added during the current revision of the existing Capital Requirements Directive, lays down prudential requirements for capital, liquidity and the credit risk for investment firms and credit institutions in EU member states. As a regulation, the CRR applies directly in every member state. It can therefore impose a single set of rules across the EU, thus leaving no scope for arbitrary interpretation and ensuring certainty as to the law for all EU single market players.

The directive, by contrast, will have to be incorporated into the national laws of the member states. The rules on bankers' remuneration and bonuses, prudential supervision, corporate governance and capital buffers will remain the responsibility of the member states' national competent authorities.

Currently still some revisions on the text by the jurists and linguists are underway.  The Parliament will have to adopt again the final texts including the potential corrections made in these revisions, in June. - The ECOFIN, in turn, shall adopt it on the basis of the compromises reached, on 21 June 2013. Afterwards the signature of the presidents of the Parliament and the Council will be required and the text will be ready for publication in the Official Journal.

More information can be found here: http://www.europarl.europa.eu/news/en/pressroom/content/20130412BKG07195/html/EU-Bank-Capital-Requirements-Regulation-and-Directive

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