Discussions were expected to continue well into the night.
In the debt crisis, central supervision of banks in the euro zone should restore confidence in the industry. The project has been the subject of dispute for months. Supervision is a prerequisite for direct financial injections into ailing banks from the ESM bailout fund.
At the crucial meeting of EU treasurers, irish finance minister michael noonan said the department heads had a corresponding german-french paper on hand. "It looks as if there is now at least a basis for a compromise."German finance minister wolfgang schauble (CDU) and his french counterpart pierre moscovici also expressed confidence and confirmed intensive contacts in recent days.
After three and a half hours, however, the ministers interrupted their deliberations. The cypriot finance minister vassos shiarly, who is currently chairing the meetings, said that the details would be discussed in individual meetings. "We will be proposing some changes to the draft legislation."
Earlier, however, schauble and moscovici had expressed confidence in the situation. "We [have] naturally made an effort with our french friends and partners to coordinate our positions," said schauble. Also moscovici confirmed: "I believe the parameters for a settlement are in place."
The banking dispute should not weigh on the meeting of EU heads of state and government starting this thursday. According to diplomats, the "bosses" had increased the pressure on the cashiers to finally get the prestigious project in the fight against the crisis off the ground.
Two key issues were resolved: the scope of supervision and the strict separation of monetary policy decisions and banking supervision within the european central bank (ECB). If the two largest EU countries agree, the others will usually follow suit. A decision of the 27 EU member states must be unanimous. After that, the EU parliament still has to vote, which was not allowed to happen until january.
On number of centrally controlled banks, "there can be agreement," moscovici said. Paris and the other EU member states want to accommodate germany and are backing away from the idea of ultimately placing all 6,000 banks in the euro zone under the control of the ECB. German demand to keep savings banks and cooperative banks under national supervision seems to be gaining ground.
"It’s clear that the big banks, especially the systemically important ones, will come under european supervision," said schauble. "Then you have to understand where the border is." His french counterpart warned that the sills should not be too high.
Austria’s finance minister maria fekter spoke of several thresholds that were under debate. Thus, the ECB could only be responsible for money houses with a balance sheet total of more than 30 billion euros. Other criteria could be the number of branches abroad or the share of gross domestic product. "What is undisputed is that those that have a program, that is, those that have already been put under assistance, should be audited by the ECB," said fekter, referring to institutions in crisis states.
The german head of department, schauble, expressed confidence that the finance ministers would be able to reach an agreement by the end of the year – as requested by the EU summit – and finalize the legal basis for supervision. Still in dispute is the legal basis for supervision and the question of how non-europeans who want to join can have a full say in decisions.
Banking supervision is the first building block of a european banking union. In the long term, it is to be supplemented by a fund for winding up ailing institutions and a pot for safeguarding customer funds.