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

I propose to take Questions Nos. 7 and 50 together.

The European Council meeting of 29 June last considered a report from the President of the European Council, in co-operation with the Presidents of the Commission, the euro group and the European Central Bank, which set out building blocks for future economic and monetary union. One of these building blocks is an integrated financial framework or banking union, which comprises three elements: an integrated system for the supervision of cross-border banks, a European deposit insurance scheme and a European resolution scheme. The euro area summit on 29 June last called on the Commission to quickly present proposals for the establishment of a single supervisory mechanism which would be considered by the Council as a matter of urgency. Significantly, it was made clear in the statement following the euro area summit that when such a mechanism is in place for banks in the euro area, the ESM could following a regular decision have the possibility to recapitalise banks directly. The statement also committed the euro group to examining the situation of the Irish financial sector with a view to further improving the sustainability of our well-performing adjustment programme.

The Commission presented legislative proposals in September for a single supervisory mechanism conferring powers on the European Central Bank for the supervision of all banks in the euro area, with a mechanism for non-euro countries to join on a voluntary basis. An ad hoc working group of senior officials has met regularly since the proposal was published and good progress has been made. The European Council discussed the single supervisory mechanism at its October meeting in the context of a report from President Van Rompuy on the work being carried out on the future of economic and monetary union. The timetable that was set in the October Council conclusions envisages that agreement on the legislative framework for the single supervisory mechanism will be reached by end of the year. At this week’s ECOFIN meeting, the Presidency gave ministers an update on progress on the single supervisory mechanism. The intention of the Presidency is that agreement on the regulation will be reached at the December meeting of ECOFIN.

Ireland supports in principle the development of a banking union for Europe. We view the single supervisory mechanism as an important element of the integrated financial framework which will break the link between the sovereign and the banking sector. We are seeking to ensure shared supervision is progressed as part of a package which will also address shared risk and mutualisation of debt. The question of the retrospective application of the European Stability Mechanism remains firmly on the table as far as Ireland is concerned. We expect to see more detail on how this can be addressed over the coming months. Any move to a banking union must respect the integrity of the Single Market and be consistent with the principle of free movement of capital throughout the European Union. The establishment of the single supervisory mechanism is a crucial and significant first step to completing the banking union. The banking union will also require further work to develop a common system for deposit guarantees and an integrated crisis management framework. Negotiations on the bank capital requirements under the fourth capital requirements directive should be also concluded, as called for by the Heads of State and Government at the October meeting of the European Council.

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