Michael McGrath (Cork South Central, Fianna Fail)
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Question 181: To ask the Minister for Finance if he supports the concept of banking union across the Eurozone and his views on how enhanced supervision of the banks at Eurozone level will proceed; and if he will make a statement on the matter. [30899/12]

Michael Noonan (Limerick City, Fine Gael)
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The Deputy will be aware that the proposal for a banking union, first mooted by Commission President Barroso on 23 May, has developed over the last number of weeks in the context of the ongoing eurozone crisis, culminating in the paper on Economic and Monetary Union to be considered at this week's European Council meeting. One of the main proposals in the paper on Economic and Monetary Union relates to an integrated Financial Framework. The main elements are: a) an integrated system for the supervision of cross-border banks; b) a European deposit insurance scheme, and c) a European resolution scheme.

The President of the European Council, Herman Van Rompuy, is due to present the report in close collaboration with the President of the European Commission, the Chair of the Eurogroup and the President of the European Central Bank at this week's European Council on 28 and 29 June to be attended by the Taoiseach. The general principles of the integrated Financial Framework and how enhanced supervision of the banks at Eurozone level will proceed will be discussed in the context of that report.

The creation of an integrated financial framework could be beneficial to Ireland but only if the impacts were to ease the burden of support the sovereign has provided to the banking sector. The Taoiseach will be addressing this further in the European Council debate.

In the case of a European deposit insurance scheme and also a European resolution fund, it would be important to Ireland that these funds are truly mutual and that there is no direct link to the sovereign in the future related to calls on these funds. For Ireland any mutualised bank resolution fund would only be of benefit if it applied retrospectively to cover the Irish bank recapitalisations.

In relation to an integrated system for the supervision of cross-border banks, the current role of the European Banking Authority is mainly to oversee the functioning and convergence of national supervisory systems. An integrated system of supervision could only be agreed on if it definitively breaks the link of the sovereign to the banking sector. Shared supervision should be complimentary to shared risk and mutualisation of debt.