13 November 2012

ECOFIN: Main results of the Council - Bank capital requirements / Bank supervision

Bank capital requirements

The Council was informed by the presidency of the state of negotiations with the European Parliament on two proposals – the so-called "CRD IV" package – amending the EU's rules on capital requirements for banks and investment firms (15654/12).

The Council held a brief exchange of views. It confirmed its commitment to reach an agreement with the Parliament before the end of the year, in line with the October European Council's conclusions, whilst maintaining the balance achieved when it approved a general approach in May.

The two proposals set out to amend and replace the existing Capital Requirement Directives by two new legislative instruments: a regulation establishing prudential requirements that institutions need to respect, and a Directive governing access to deposit-taking activities. They are aimed at transposing into EU law the so-called "Basel III" agreement, concluded by the Basel Committee on Banking Supervision and approved by the G20 in November 2010.

Based respectively on articles 114 and 53(1) of the Treaty on the Functioning of the European Union, the regulation and the directive require qualified majority for adoption by the Council, in agreement with the Parliament.

Bank supervision

The Council discussed, on the basis of a note from the presidency (15663/12), proposals aimed at establishing a single supervisory mechanism (SSM) for credit institutions in the eurozone and in other EU Member States choosing to participate. Experts will continue work on the proposals, in the light of the guidance provided by the Council. The aim is to reach an agreement at the Council's meeting on 4 December.

The two proposed regulations – one conferring specific supervisory tasks on the European Central Bank, the other modifying regulation 1093/2010 establishing the European Banking Authority – are a key element of a broader plan to establish a banking union for the euro area. The plan also foresees a common resolution authority and a common deposit guarantee scheme.

The October European Council set 1 January 2013 as a deadline for agreeing on the legal framework set out in the two regulations, whilst indicating that work on operational implementation would take place during 2013 (see conclusions, EUCO 156/12, esp. paras 6-10).

In June, eurozone heads of state and government stated that once the SSM is in place for banks in the eurozone, the European Stability Mechanism "could, following a regular decision, have the possibility to recapitalise banks directly". Under the proposals, the ECB would have direct oversight of all eurozone banks, although in a differentiated way and in close cooperation with national supervisory authorities. Non-euro Member States that wish to participate in the SSM would be able to enter into close cooperation arrangements. The proposals also foresee amendments to the EBA regulation, in particular to ensure non-discriminatory and effective decision-making in the EBA's board of supervisors.

Based on article 127(6) of the Treaty on the Functioning of the European Union, the draft ECB regulation requires unanimity for adoption by the Council, after consulting the European Parliament and the ECB. The draft EBA amending regulation is based on article 114 of the TFEU, which requires a qualified majority for adoption by the Council, in agreement with the Parliament.

Full Council Conclusions

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