Explanatory Memorandum to COM(2012)512 - Amendment of Regulation 1093/2010 on a European Banking Authority as regards its interaction with the Council Regulation on the ECB supervision of credit institutions - Main contents
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| dossier | COM(2012)512 - Amendment of Regulation 1093/2010 on a European Banking Authority as regards its interaction with the Council Regulation on ... |
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| source | COM(2012)512  |
| date | 12-09-2012 |
Today, the solidity of the banking sector is in many instances still closely linked to the Member State in which they are established. Doubts about the sustainability of public debt, economic growth prospects, and the viability of credit institutions have been creating negative, mutually reinforcing market trends. This may lead to risks for the viability of some credit institutions as well as for the stability of the financial system, and may impose a heavy burden for already strained public finances of the Member States concerned.
The situation poses specific risks within the euro area, where the single currency increases the likelihood that developments in one Member State can create risks for economic development and the stability of the Euro area as a whole. Furthermore, the current risk of financial disintegration along national borders significantly undermines the Single Market for financial services and prevents it from contributing to economic recovery.
The establishment of the European Banking Authority (EBA) by Regulation (EU) No. 1093/2010 of the European Parliament and the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority), and of the European System of Financial Supervision (ESFS) already contributed to improved cooperation between national supervisors and to the development of a single rulebook for financial services in the EU. However, supervision of banks remains to a large extent within national boundaries and thereby fails to keep up with integrated banking markets. Supervisory failings have, since the onset of the banking crisis, significantly eroded confidence in the EU banking sector and contributed to an aggravation of tensions in euro area sovereign debt markets.
The Commission has therefore called in May 2012, as part of a longer term vision for economic and fiscal integration, for a banking union to restore confidence in banks and in the euro. One of the key elements of the banking union should be a Single Supervisory Mechanism (SSM) with direct oversight of banks, to enforce prudential rules in a strict and impartial manner and perform effective oversight of cross border banking markets. Ensuring that banking supervision across the Euro area abides by high common standards will contribute to build the necessary trust between Member States, which is a pre-condition for the introduction of any common backstops.
At the Euro area summit on 29 June, 2012, the Heads of State or Government have called on the Commission 'to present proposals for the setting up of a single supervisory mechanism shortly. When such a mechanism will be in place for banks in the euro area the ESM could, following a regular decision, have the possibility to recapitalize banks directly'. The European Council conclusions of the meeting held on the 28/29 June 2012 state that this Euro Area statement and the proposals that the Commission will present accordingly should take into account the development of 'a specific and time-bound road map for the achievement of a genuine Economic and Monetary Union'.
Under this new mechanism, the ECB will carry out a wide range of key supervisory tasks over credit institutions in the Euro area Member States. With a view to maintaining and deepening the internal market, other Member States will be allowed to enter into close collaboration with the ECB.
To avoid fragmentation of the internal market following the establishment of the single supervisory mechanism, the proper functioning of the EBA needs to be ensured. The role of the EBA should therefore be preserved in order to further develop the single rulebook and ensure convergence of supervisory practices over all EU.
Along with the proposal for a Council Regulation conferring specific tasks on the ECB concerning policies relating to the prudential supervision of credit institutions in accordance with Article 127(6) TFEU, this proposal introduces targeted amendments to the Regulation establishing the European Banking Authority.
Contents
The Commission has taken into account the analysis done in the context of the adoption of the 'supervisory package' creating the European Supervisory Authorities, which assessed operational, governance, financial and legal aspects relevant to the establishment of a SSM. The preparation of a formal impact assessment was not possible within the timetable set by the Euro area Summit of 29 June.
The proposal is based on Article 114 TFEU since it amends Regulation (EU) No. 1093/2010 adopted under the same legal basis.
The proposal is limited to an adjustment of the procedural modalities under which the EBA operates to take account of the conferral of supervisory tasks on the ECB and to ensure that the EBA can continue to pursue its functions to protect the integrity, efficiency and orderly functioning of the internal market for financial services and maintaining the stability of the financial system within the internal market. It does not alter the balance of respective competences between the EBA and national authorities. The provisions in the proposal do not go beyond what is strictly necessary to achieve the objectives pursued. The proposal is therefore in line with the principles of subsidiarity and proportionality set out in Article 5 of the Treaty on the European Union.
EBA powers, in particular binding mediation/emergency situations
The wording of Articles 4, 18(1) and 35(1) to (3) is amended to ensure that EBA can carry out its tasks also in relation to the ECB by clarifying that the notion of 'competent authorities' includes also the ECB, as it does in the other articles which make reference to 'competent authorities'.
In order to ensure that the EBA can carry out its tasks to settle disagreements and act in emergency situations also in relation to the ECB, in Articles 18 and 19, paragraphs 18(3a) and 19(3a) are introduced to provide for a specific procedure in relation to the decision taken by the EBA under Article 18(3) or 19(3). The procedure provides that if the ECB does not comply with an action by EBA to settle a disagreement or to address an emergency situation, it should be required to explain its reasons. In that unlikely case, where the relevant requirements are set out in directly applicable Union law, the EBA can adopt an individual decision addressed to the financial institution concerned to enforce its action, and it is normally expected to do so. This will ensure full enforceability of EBA's settlement of a disagreement and its action in an emergency situation.
The fact that the ECB will coordinate the position of the Euro area Member States requires a review of the voting modalities currently provided for in the EBA regulation, in order to ensure that EBA decisions are taken in the interest of maintaining and strengthening the internal market for financial services.
Under the EBA Regulation, decisions concerning regulatory matters (binding technical standards, guidelines and recommendations provided for in Articles 10, 15 and 16, and decisions to reconsider restrictions on financial activities provided for in Article 9.5) as well as budgetary matters (Chapter VI) are taken by the Board of Supervisors on the basis of a qualified majority of its members, as defined in Article 16 i TEU and Article 3 of the Protocol No 36 on transitional provisions.
Decisions on other issues (e.g. on breach of law according to Article 17, on settlement of disagreement under Article 19, on the election of Management Board) are adopted by the Board of Supervisors by simple majority of the voting members according to the rule 'one man one vote'.
If voting rights remain unchanged, it cannot be ensured that decisions taken by simple majority will always represent the interests of the Union as a whole. Voting arrangements need therefore to be adjusted in some specific cases of simple majority to ensure that the integrity of the internal market remains preserved while avoiding at the same time the risk of paralysing the EBA decision making.
The best option identified to achieve this objective is to confer decision making powers on an independent panel and provide for a strong reverse voting mechanism which will ensure that the proposal prepared by the independent panel is supported by Euro area and non-Euro area Member States. This will also ensure that Euro area Member States cannot have a blocking minority in case of actions taken against one of them.
Article 41 of the EBA Regulation is therefore amended in order to confer stronger decision making powers to the independent panel on breaches of EU law and settlement of disagreements, and adapt rules on its composition accordingly.
Article 44 of the EBA Regulation is amended to provide that the decisions proposed by the independent panel are adopted unless they are rejected by a simple majority, including at least three votes of participating Member States and non-participating Member States. A specific provision is added on the appointment of the independent panel.
In view of the decisive influence of members from Member States participating in or closely cooperating with the single supervisory mechanism when electing the Management Board (simple majority of members present), members from Member States not participating in the SSM could not be appropriately represented adequately in the Management Board. To ensure a balanced composition of the Management Board, reflecting the EU as a whole and including Member States not participating in the single supervisory mechanism, the proposal amends the composition of the Management Board of the EBA to ensure that at least two members from Member States not participating in the single supervisory mechanism are represented in the Management Board.
Article 45 of the EBA Regulation is therefore amended to ensure that the Management Board includes at least two Member States which are not participating in the SSM.
Finally, in order to take into account any developments in the number of Member States whose currency is the Euro or whose competent authorities have entered into a close cooperation in accordance with Article 6 of Regulation …/…, the Commission is required to review the proposed provisions to examine whether in light of such developments any further adjustments are necessary to ensure that EBA decisions are taken in the interest of maintaining and strengthening the internal market for financial services.
The proposal has no implications for the EU budget.