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

The European Council meeting of 29 June 2012 considered a report from the President of the European Council, in co-operation with the Presidents of the Commission, the Eurogroup and the ECB, 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 in the form of the single supervisor mechanism; a recasting of the deposit insurance scheme directive - the DGS directive - to further harmonise national DGSs; and a European harmonised bank recovery and resolution scheme, commonly referred to as the BRRD.

Significantly, the statement of the euro area summit clearly stated that when a single supervisory mechanism was in place for banks in the euro area, the ESM would, following a regular decision, have the possibility to recapitalise banks directly. Furthermore, to complete the banking union initiative, the European Commission will this summer bring forward proposals for a single resolution mechanism to co-ordinate the application of resolution tools to banks.

The European Council of December 2012 noted the Commission's intention to submit a proposal for a single resolution mechanism for member states participating in the single supervisory mechanism to be examined as a matter of urgency during the current parliamentary cycle of the European Parliament, that is, before May 2014. The stated position of the ECOFIN is that the building blocks for banking union should be put in place as soon as possible. This is a sensible approach and our work as EU President is helping to advance banking union in as speedy a manner as possible. As we move into the final weeks of our Presidency, we will continue to afford top priority to the legislative files relating to banking union in line with the conclusions of the European Council which set out a timeframe and a series of steps to achieving this.

The Irish Presidency is giving absolute priority to all the files relating to the promotion of banking union in line with the ambitious agenda for banking union. We have achieved agreement on the single supervisory mechanism, a very significant step forward towards ensuring financial stability and thus facilitating growth.

Additional information not given on the floor of the House

We have also achieved agreement on the capital requirements directive IV, which aims to strengthen the capital requirements for banks and the overall effectiveness of regulation for the sector and enhance financial stability. We have made good progress towards agreement on the bank recovery and resolution directive as the essential next step, with a view to agreement by June of this year, as envisaged by the European Council. Once this has been agreed, the European Commission is expected to submit a proposal for a single resolution authority, which will build on the work now under way. The remaining work on the DGS can commence once the financing elements of the BRRD have been agreed.

An important complement to the banking union package is the development of an operational framework for the direct recapitalisation of banks by the European stability mechanism, ESM which should include the definition of legacy assets. It is expected that the ESM guidelines on the direct banking recapitalisation instrument will be completed by end June.

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