BRUSSELS (MNI) – EU leaders appeared Thursday night to have
retreated from a commitment made last June to have a single supervisory
system for Eurozone banks operational by January 1, 2013.

Instead, they said tonight that they would now aim to agree on the
legal framework for the plan by the end of this year and then gradually
implement it in 2013.

The shifting of the goal post is a compromise between the European
Commission, France and peripheral Eurozone states, who want a common
supervisory system in place quickly, and about half a dozen countries –
led by Germany – that want to take more time to iron out some of the
complex and controversial details.

The countries and Commission officials that have been pushing for
quick implementation want the joint supervisory system in place quickly
so that the currency bloc’s bailout fund, the European Stability
Mechanism (ESM), can be authorized to inject capital directly into
struggling banks, as the EU leaders agreed in June.

“There is still a hell of a lot to do by December,” a senior
Commission official confessed to journalists. “There are lots of
outstanding issues.” He cited details such as the scope of the new
supervisor’s authority, voting weights, and divergent views over how
soon the ESM can start direct capital injections after an agreement is
finalized.

Germany is alone in pushing for centralized supervision to be
limited to only the largest banks. But it is supported by other
countries, including the Netherlands and Finland, in the view that the
ESM’s power to directly recapitalize banks should come only after the an
“effective” supervisory system has been established.

The European Commission’s plan to empower a new Supervisory Board
at the European Central Bank, which would assume ultimate authority for
supervising the Eurozone’s 6000 banks, has also run into objections from
the Council of the EU, the EU legislative body representing member
governments, which has argued that it risks undermining the power of the
ECB’s Governing Council as it is enshrined in the EU treaty.

“We need to find a way to make the Governing Council [of the ECB]
the formal decision making board while allowing the supervisory council
to prepare those decisions,” the Commission official said.

–Brussels Newsroom, pkoh@mni-news.com; +324-952-28374

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