STRASBOURG, September 12 – European lawmakers Thursday agreed the first step in an ambitious plan to tighten banking supervision, initially by transferring the power to supervise the eurozone’s biggest banks to the ECB in a year.
Formal agreement to make the European Central Bank the “single supervisor” for banks was agreed by 556 votes in favour and 54 against.
The step, the first pillar in a wider scheme towards safer and more accountable banking, was broadly agreed in March by members of the 17 nation eurozone and Parliament but had not been put to the vote.
MEPs in fact postponed this week’s vote by 48 hours, demanding more transparency and control, including a say in approving the chair and vice-chair of the supervisory board.
The European Parliament green light “is a lynchpin of a deeper economic and monetary union,” said European Commission President Jose Manuel Barosso.
“Now our attention must turn urgently to the Single Resolution Mechanism,” he said, referring to the second pillar in the scheme for a single banking union.
The SRM would give the Commission the power to shut down any of the eurozone’s 6,000-plus banks even if national authorities disagreed.
Banking union in effect would shift the burden of dealing with failing banks from taxpayers, with rules established to force creditors to take losses and a reolution fund created with mandatory levies on the banking sector.
But there is scepticism in Germany about whether the mechanism is compatible with current EU treaties.