Billy Kelleher (Cork North Central, Fianna Fail)
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To ask the Minister for Finance the progress that has been made to date in implementing a Europe wide system of bank supervision; and if he will make a statement on the matter. [42301/12]

Michael Noonan (Limerick City, Fine Gael)
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The European Council meeting of 29 June considered a report from the President of the European Council in cooperation with the Presidents of the Commission, Eurogroup and 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 (a) an integrated system for the supervision of cross-border banks (b) a European deposit insurance scheme, and (c) a European resolution scheme. The Euro Area Summit also on 29 June called on the Commission to quickly present proposals for the setting up of a single supervisory mechanism which would be considered by the Council as a matter of urgency. Significantly the statement of the Euro area Summit clearly stated 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 Eurogroup 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 ECB for the supervision of all banks in the euro area, with a mechanism for non-euro countries to join on a voluntary basis.

Ireland supports in principle the development of a banking union for Europe. Our support for a single supervisor is contingent on such a system definitively breaking the link between the sovereign and the banking sector. We are also seeking to ensure that shared supervision is progressed as part of a package which will also address shared risk and mutualisation of debt. The question of retrospective application of ESM remains firmly on the table as far as Ireland is concerned and we would 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 Commission called on the Council and European Parliament to adopt the legislative proposal by the end of 2012. While the timetable is ambitious we will be supporting efforts by the European Council to meet this target.

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.