Plans for a single eurozone supervisor needs treaty rewrite -- 'FT'
A SECRET legal opinion drawn up for EU finance ministers warns that a plan to create a single eurozone banking supervisor is illegal.
The 'Financial Times' has reported that any problems with creating a single banking supervisor would be a further blow to the Government's efforts to reduce the cost of Ireland's bank debt.
Finance Minister Michael Noonan told the Dail last night that the agreement reached by European leaders in June to break the link between bank and national debt was contingent on a banking supervision mechanism being in place by January.
The 'Financial Times' said yesterday that a paper from the EU Council's top legal adviser argues that the plan for a banking supervisor goes "beyond the powers" permitted under law to change governance rules at the European Central Bank (ECB).
The legal service concludes that it would be impossible to give a bank supervision board within the ECB any formal decision-making powers without altering EU treaties. That would mean another referendum here and votes in most other European parliaments.
The European Commission's plans for a single banking regulator has not met with universal praise from individual governments. Germany is known to be concerned, with countries outside the eurozone such as Britain, Poland and Sweden also anxious.
EU leaders are expected to discuss the creation of a banking union in Brussels today.
The leaders have already watered down the previous plan to limit powers for the ECB to supervise lenders to allay the concerns of countries outside the eurozone.
Winning broad support for a prompt introduction of the new supervision framework is important not just for Ireland. It would also allow the eurozone's rescue fund, the European Stability Mechanism (ESM), to directly inject much-needed capital into banks such as those in Spain.
Elke Koenig, head of Germany's markets regulator BaFin, has warned that the original deadline to start such supervision by the beginning of next year was unrealistic.
"I could imagine that we get there in January 2014. That's a guess," she told German television station ARD last week, advocating a cautious approach.
"I support the idea of a strong European regulator, but I have not seen a roadmap of how we get there. The Dutch central bank said policy-makers should quickly allow the ECB to supervise major lenders and to enable the ESM to directly recapitalise troubled banks.