The EU's top finance regulator has called for any European banking union to stretch beyond the confines of the euro zone and be policed by the EU's main financial watchdog, putting him at odds with Franco-German wishes for a bigger European Central Bank role.
Centralised monitoring of Europe's biggest banks is critical to establishing a joint European response to the problems of the region's lenders, such as those that are set to force Spain to seek international aid. EU leaders will discuss this and other elements of a banking union when they meet on June 28 and 29. Such a union could also pool country funds to protect deposits and close down banks.
Michel Barnier, the European commissioner in charge of writing financial regulation, said supervision of lenders in a banking union should be done across all EU countries rather than just the euro zone, making it sensible to give the European Banking Authority (EBA) this role.
He is concerned that a scaled-down banking union could undermine the EU single market in financial services, but he faces considerable obstacles in introducing a scheme across all 27 EU member states. "Following the logic that this banking union is important for the 27 countries, it would be logical that extra supervisory powers are given to the EBA, which we created for the single market," Barnier told Reuters in an interview.
"The ECB is part of the EBA. If not all 27 countries want to take this step, you could have a special committee created within the EBA with the presence of the ECB. That would be coherent." The EBA was set up at the start of last year to bolster supervision of banks, but it has few powers. Barnier will find it hard to win backing to strengthen the EBA after its stress tests last year failed to uncover the full extent of problems at Spanish lenders.