Dispute with ECB European Parliament Delays Banking Union Vote
The European Parliament has delayed an important vote on the euro zone banking union that will see the most important financial institutions placed under the supervisory of the European Central Bank. Members of parliament want greater ECB accountability.
A dispute over Europe's planned banking union -- a key European Union financial reform in response to the 2007 financial crisis -- has broken out between the European Parliament and the European Central Bank (ECB), and an important vote on the issue was delayed from Tuesday to Thursday. In response, the International Monetary Fund (IMF) is calling on the European Union to move more quickly to implement the measures, with criticism coming directly from IMF chief Christine Lagarde herself.
The argument centers on whether members of the European Parliament should be provided with detailed minutes of the proceedings of the new banking supervision board, a provision parliament considers to be a vital accountability measure. The ECB has so far rejected these requests. Reuters reported Tuesday that the ECB is instead offering to provide "summaries."
On Monday, the European Voice newspaper cited an ECB official stating there were "formal restrictions" on what the bank could disclose about its decision-making process. The Economist-owned Brussels paper cited an official at the bank stating that the proceedings were sensitive and there was a fear "we might be jeopardizing the survival of banks" if information were shared with members of parliament.
In its own official statement, the ECB writes: "In advance of the vote in the parliament, the European Central Bank is progressing with its final discussions with the European Parliament on accountability arrangements and looks forward to reaching an agreement shortly. Broad agreements have already been reached."
European Parliament President Martin Schulz is negotiating intensely with ECB chief Mario Draghi, Schulz's spokesperson Armin Machmer said. He added that the two were making progress towards an acceptable agreement. If they are unable to reach a deal, the European Parliament could delay its vote until October, endangering the entire timetable for the banking union.
In Paris ahead of an IMF meeting, Reuters quoted Lagarde as saying, "we very much think of the euro area as a beautiful ship that has been built, nurtured for the soft seas, but which is not yet completely finished for the rough ones."
"A lot has been done in relation to banking union," she added. "If I have a message today it is that that particular part of the ship needs to be finished, needs to be completed and speed is of the essence."
The euro-zone member-states are hoping the banking union will stabilize Europe's banking system and make it resistant to the kind of turbulence felt in 2007 that almost led the European financial system to collapse after Lehman Brothers folded, an event which launched the ensuing European debt crisis and created an existential threat to the common currency.
Supervisory Role for ECB
The current vote, the first in a series of steps to create a banking union, would create the supervisory role for the ECB. Once it is given parliament's blessing, the ECB is expected to assume supervisory responsibility for the 130 most important banks in the euro zone. The ECB is also expected to complete an audit of the banks' balance sheets by February 2014 in order to identify problems as early as possible. A unified stress test by the ECB and the EU banking supervisory authority EBA is expected to begin in May 2014.
The affected institutions comprise 85 percent of the total assets of banks in the 17 euro-zone member states. The agency, which is to be set up inside the ECB will have around 1,000 employees, including 700 banking supervisors. A supervisory board will be created within the agency, but the ECB's governing council would still have the final say on important matters.
Germany has also placed several barriers to the implementation of a fully fledged banking union in Europe. In Berlin, politicians oppose sharing the financial burdens of failing banks within the euro zone without changes to European treaties.
dsl -- with wires