Press Release: Economic and Financial Affairs Council meeting, Brussels, 12 December 2012

The Council set out its position on proposals aimed at establishing a single supervisory mechanism (SSM) for the oversight of banks. The presidency will now negotiate with the European Parliament with the aim of adopting the legislation before the end of the year. The proposals involve two regulations: one conferring supervisory tasks on the European Central Bank, the other modifying regulation 1093/2010 on the European Banking Authority.

In June, eurozone heads of state and government stated that when an effective SSM is established, the European Stability Mechanism, which currently contributes to bank capitalisations via member state treasuries, could, following a regular decision, have the possibility to recapitalise banks directly. This will enable the vicious circle between banks and sovereigns – which has been a salient feature of the debt crisis in Europe – to be broken.

The SSM will be composed of the ECB and national competent authorities. The ECB will be responsible for the overall functioning of the SSM. Under the proposals, the ECB will have direct oversight of eurozone banks, although in a differentiated way and in close cooperation with national supervisory authorities. Non-eurozone member states wishing to participate in the SSM will be able to do so by entering into close cooperation arrangements.