Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

The bank in Frankfurt is the overriding and superior authority and the Central Bank will act as an agent of the ECB, but some of the supervision will be undertaken directly by the new regulatory office that will operate out of Frankfurt.

I have a further note which may be helpful to the Deputy. The ECB will be the direct supervisor of banks with assets of more than €30 billion or assets to national GDP ratio of 20%. To ensure the SSM is truly the European level supervisor it will involve banks in all member states covering at least the three most significant banks in each participating member state, which effectively is Allied Irish Banks, Bank of Ireland and PTSB in our case. Ireland's credit unions will be exempt from regulation by the supervisory authority.

The method of how it works is as follows. The European Central Bank will be responsible for the single supervisory mechanism and will begin to supervise all major or systemically important banks in the eurozone and in those countries that choose to join the mechanism. The ECB, as common supervisor, will take over responsibility for these banks from the national central banks from November 2014. National central banks will continue to play an important role, but the ECB will have the ultimate responsibility for the system. The system provides for a differentiated approach to supervision depending on the size and significance of the banks. It provides for the equal treatment for euro area and non-euro area member states to allow banking union to be attractive to all 28 member states thereby protecting the Single Market. Smaller institutions will not come under the direct supervision of the ECB but the ECB will remain responsible and can step in to supervise these institutions.

The agreement provides that in most cases the newly created supervisory board within the ECB votes on a one-member-one-vote principle. This will ensure the correct balance in decision making between larger and smaller members states. The system also ensures that monetary policy remains separate from supervisory policy, something that was important to Germany.

The Central Bank is independent in how it operates and I can read another note on it. At the meeting under any other business we will discuss implementation of the single supervisory mechanism. The SSM regulation requires the ECB to send a quarterly progress report to the Council, the European Parliament and the Commission from 3 November 2013. The purpose of this report is to provide these institutions with an update on the progress in operational implementation of the SSM. The first of these reports covering the period from 3 November 2013 to February 2014 issued recently. I expect this report will form the basis of our discussion on this matter at ECOFIN.

I was asked about issues the ECB highlighted in the first quarterly report. The briefing answer is as follows. The report, which is required under the SSM regulation, not only covers the three months up to 3 February 2014, but also the preparatory work undertaken by the ECB in close co-operation with national supervisors and the central banks since the euro area summit of 29 June 2012. The transitory structure set up by the ECB to prepare for the start of the single supervisory mechanism has already made significant progress thereby enabling a smooth entry into force of the SSM regulation on 3 November 2013. The supervisory model of the SSM has largely been developed as reflected in the draft supervisory manual of the SSM, which covers all the tasks and supervisory processes of the SSM, including the relations between the ECB and the national competent authorities. The key concept of the supervisory manual is that joint supervision teams will directly supervise the approximately 130 banks considered significant in accordance with the SSM regulation. The composition of the ISTs was defined in the first meeting of the supervisory board.

On the staffing levels in the Central Bank, since the authorities in Frankfurt will have direct supervisory authority for the three main banks, it would be unusual if our Central Bank required extra regulatory staff, but of course it is independent.