ECOFIN

George Osborne Excerpts

Wednesday 19th December 2012 Written Statements

[The Chancellor of the Exchequer (Mr George Osborne)]

A meeting of the Economic and Financial Affairs Council was held in Brussels on 12 December 2012. Ministers discussed the following item:

Banking Supervision Mechanism

Ministers agreed an approach on the Commission’s proposal for a single supervisory mechanism in the European Central Bank and an amending regulation for the regulation establishing the European Banking Authority (regulation 1093/2010).

The Government have been clear that the UK will not participate in the banking union, including the single supervisory mechanism. Other member states outside the eurozone have also signalled that they will not participate at this stage. Accordingly, it is vital that these proposals are underpinned by measures that protect the single market. To ensure this, the Government have secured a number of safeguards to protect those outside banking union.

There will be a duty on the ECB to have regard to the unity and integrity of the single market. Importantly, the ECB will be subject to an express obligation to ensure that no action, proposal or policy of the ECB shall directly or indirectly discriminate against any member state or group of member states as a venue for the provision of banking or financial services in any currency.

The scope of the ECB’s supervisory remit will be expressly limited to credit institutions in participating member states. The supervision of central counterparties will be explicitly excluded from the ECB’s mandate.

The Government have also secured symmetry of treatment between the ECB and national competent authorities in those member states who are not participating in banking union. Powers and decisions of the EBA, for example in cases of mediation between supervisors, will apply equally to the ECB and other supervisors. The Council has also agreed that the ECB’s supervisory powers should be aligned with those available under Union law to national competent authorities in non-participating member states.

There will be a statutory underpinning for a bilateral memorandum of understanding between the ECB and Bank of England to ensure proper co-ordination of supervision for cross-border banks.

The introduction of banking union will see the interests of the eurozone converge as participants move forwards with further integration. We have therefore secured changes to voting arrangements in the European Banking Authority to ensure that the eurozone cannot systematically dominate decision-making on matters that affect the whole single market. All key decisions taken by the EBA will require a double majority—that is either an overall qualified majority or simple majority in the Board of Supervisors of the EBA, plus a simple majority of representatives of participating member states and a simple majority of representatives of non-participating member states. This will ensure that all member states will continue to have a meaningful voice in EBA decision making. In addition there will be a review by the Commission of the decision-making rules when the number of non-participating member states reaches four or fewer and this review will report to the European Council.

Taken together, this is a good agreement for the eurozone and the wider European Union, including the UK.

The proposals will now be discussed between the Council and the European Parliament before the final texts can be agreed.