BRUSSELS, Dec 4 (Reuters) - EU finance ministers discussed plans for a supervisory mechanism for banks on Tuesday, but the depth of divisions between France and Germany highlighted the difficulty in reaching agreement, making a year-end deadline uncomfortably tight.
Tuesday’s occasionally heated talks ended in disagreement and the ministers will resume their discussions on Dec. 12.
Following are comments from ministers and officials after the talks:
”We support the goal of a joint European banking supervision. It’s an important part of our efforts to stabilise the European internal financial market and the European currency but we also have to make sure that the decisions include the right directions.
”We need a consistently high standard of supervision for all financial institutions in the participating member states. That can’t just be true on paper but has to be true in reality as well.
”We all agree that no European institution can supervise all 6,000 European banks with the same intensity, so a solution has to be found which banks are supervised by national authorities and which by the European ones.
”I believe that we will find a solution that will be in line with the Commission’s compromise that the European Banking Authority gets the right to monitor the national supervisors and will get the right to get involved, although we are still trying to reach agreement on the criteria for such a right.
”We had a discussion again about how to make sure that within the ECB the responsibility for monetary policy... (and involvement in supervision) are absolutely separated. That also includes opening the possibility for non-euro zone states to participate in the banking supervision on the basis of equal treatment. We still need a solution to both of those items. We’re working on that.
”We will get together probably on the afternoon of Dec. 12 to find a solution before the EU summit.
“For the banking supervision we need democratic legitimacy and legal control, for monetary policy that is excluded by the need for independence. So it needs to be clearly separated. The heads of state and government decided nothing else, because they agreed that European banking supervision should include the ECB but they did not say that the ECB should build up a European banking supervision.”
”We discussed the first draft of a memorandum of understanding for Cyprus. A lot more work is needed. That’s everyone’s opinion and many member states have said that yesterday.
”That’s both about the banks’ needed volume as well as the question who the creditors are and how the creditors can be involved in taking the costs of the recapitalisation of the banking sector.
”We expect complete financial transparency from Cyprus relating to money laundering issues, which fulfil EU standards and international requirements. We also expect quick implementation of all requirements that international organisations make.
”On top of that we need extensive cooperation on tax questions.
“We will also have to consider how to reduce the (size of) the Cypriot financial sector, which is over-sized, and how, given the debt level, we can approach privatisation.”
“I am one of the people who regrets his decision. We each said three-quarters of a year ago that we both deem the other to be the adequate candidate and I got through with that then. Now we will have to see what we will do with it. I won’t say more than that. Those involved have to take a look at it and discuss it now, and speculation won’t help us.”
Following are comments from before Tuesday’s discussions:
ON THE POSSIBILITY OF COMPROMISE OVER THE ECB‘S ROLE:
”We think there should be equal treatment to all members of the European Union that want to join the supervision board.
”There can be no unfair treatment of the non-euro countries. There must be safeguards and we must be able to set our own capital requirements, higher capital requirements for banks.
“There could be a compromise today but there is quite a lot of road to travel. There is a long time to Christmas. We can have extra Ecofins (meetings of EU finance ministers) at any time and continue negotiations.”
”We will have to find a mix. On the one hand national supervisors have the capacity to deal with such a supervisory function, on the other hand the new institution has to set the tone. We are likely to chose a layered approach whereby the tone is set by the main regulator and operationally the national bodies are used to carry out supervision on the spot.
“There are countries that insist that small banks are not supervised by the central authority but Austria is open. We believe that the same rules and methods should apply to all. Who carries out the inspections on the ground should not matter.”
ON FRANCE‘S POSITION:
“We in France want a supervision system that applies to all the banks - all the banks in the European Union - that is directed by and under the responsibility of the European Central Bank.”
“The problems in Europe do not just come from the banks called systemic. It’s natural that banks have national supervisors too. But the European Central Bank has to have the ultimate responsibility and control, otherwise it’s not a real system of banking supervision. We can be flexible and find practical arrangements for local banks, but the principles have to be respected.” (Reporting by Annika Breidthardt, Sebastian Moffett, Robert-Jan Bartunek and John O‘Donnell; compiled by Sebastian Moffett and Rex Merrifield)