Many agree that a European Union banking union is required following the sovereign crisis; there is less unanimity in how that union should be structured. The European Commission has provided the opening gambit in launching proposals for supervision of the financial system.
The Commission this morning published three documents outlining its proposals for a single supervisory mechanism, or SSM, for banks led by the European Central Bank.
José-Manuel Barroso, president of the European Commission, said: "This new system, with the European Central Bank at the core and involving national supervisors, will restore confidence in the supervision of all banks in the euro area. The European Parliament will have a crucial role to play in ensuring democratic oversight."
However, there are concerns among market participants of a lengthy round of negotiations, with certain aspects of the proposals likely to be keenly fought over by the likes of Germany and the UK in particular.
Simon Lewis, the chief executive at the Association for Financial Markets in Europe, said the lobby group welcomed the Commission’s proposal “as a vital step towards restoring confidence in Europe’s financial system and wider economy”.
But he added: “Some key issues remain to be resolved, including the implications for the Single Market; the allocation of responsibilities between the ECB and national supervisors within and outside the banking union; and the essential backstop arrangements for resolution and depositor protection. We stand ready to assist policymakers in working through the issues.”
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