The EU Commission has published a speech given on 3 September 2012 by Olli Rehn, Vice-President of the European Commission and member responsible for Economic and Monetary Affairs and the Euro on EU banking union entitled “Towards a Genuine Economic and Monetary Union”.
The EU Commission sees banking union as a top priority and proposes a two-stage process. The first stage involves the establishment of a Single Supervisory Mechanism (“SSM”) for Eurozone banks under the authority of the European Central Bank (“ECB”). Note, however, that this press release from the European Parliament would suggest that the authority to supervise non-Eurozone banks would remain with the European Banking Authority.
The legislative proposal for the SSM will be presented by the EU Commission within two weeks, with a view to it being finalised by the end of 2012. The SSM will apply to all Euro area Member States, but other Member States will be free to participate if they so choose. As even small banks can represent a source of systemic risk, the SSM will apply to all Eurozone banks. Whilst the ECB will have prime responsibility for the administration of the SSM, national supervisors will continue to play an important role.
The second stage of banking union will involve the creation of a common deposit guarantee scheme as well as for a single European recovery and resolution framework.