By Simon Miller
Denmark could be the first non-eurozone country to join the proposed banking union, its economy minister said today.
The country could approve proposals to make the European Central Bank (ECB) its top bank supervisor if certain conditions are met.
This morning, the European Commission set out its proposals to for a single supervisory mechanism (SSM) for banks in the euro area where the ECB will take ultimate responsibility for specific tasks related to the financial stability of all eurozone banks.
The ECB will become responsible for tasks such as authorising credit institutions; compliance with capital, leverage and liquidity requirements; and conducting supervision of financial conglomerates.
It will also be able to carry out early intervention measures when a bank breaches or risks breaching regulatory capital requirements by requiring banks to take remedial action.
The ECB will cooperate with the European Banking Authority (EBA) within the framework of the European system of financial supervision. The role of the EBA will be similar to today: it will continue developing the single rulebook applicable to all 27 member states and make sure that supervisory practices are consistent across the whole Union.
For cross-border banks active both within and outside Member States participating in the SSM, existing home/host supervisor coordination procedures will continue to exist as they do today. To the extent that the ECB has taken over supervisory tasks, it will carry out the functions of the home and host authority for all participating Member States.
Internal market commissioner Michel Barnier said: "Banking supervision needs to become more effective in all European countries to make sure that single market rules are applied in a consistent manner. It will be the role of the ECB to make sure that banks in the euro area stick to sound financial practices. Our ultimate aim is to stop using taxpayers' money to bail out banks".
He continued: "We have proposed a mechanism to separate supervision from monetary policy within the ECB, and made sure that the ECB will be accountable to the European Parliament for supervisory decisions".
Although confined to eurozone members, the nine other EU countries will be able to voluntarily join and Denmark’s economy minister Margrethe Vestager told Bloomberg that it wanted guarantees that any bank oversight in Europe would not put its lenders at a competitive disadvantage “regardless of whether Denmark is part of the supervision.
She added: “If we, as a country outside the euro, are to join the supervision, it will have to be on equal terms, ensuring that we will also be in on deciding how to set up supervision. If a bank gets into trouble, other banks must support it. Taxpayers will not have to pay, as in the Danish model where banks stand up for each other.”