The European Central Bank would have veto powers over any bank mergers in nations that sign up to ECB-led supervision, under draft banking union rules designed to tame the euro-area’s debt crisis.
National supervisors would notify the ECB of a proposed banking acquisition at least 10 days before the deadline for a deal to be completed, according to a compromise plan released to some media outlets
The ECB "shall decide whether to oppose the acquisition," according to the draft measures drawn up by Cyprus, which holds the European Union’s rotating presidency. The proposals would also create a panel in the ECB to review its supervisory decisions.
EU leaders agreed in June and October to move forward with common ECB-led bank supervision to separate financial-sector risks from sovereign debt troubles, with the goal of agreeing on a political framework by Jan. 1. If a common supervisor is set up next year, it would open the door for the euro area’s firewall-fund to offer direct aid to banks.
"The panel of review shall have sufficient legal expertise to provide expert legal advice on the legality of the ECB exercise of its powers," according to the document, dated Nov. 16.
The proposals would also give the ECB powers to require individual banks to raise capital, reduce the riskiness of their activities and disclose information on how liquid their assets are.
European Central Bank Vice President Vitor Constancio said on Nov. 14 that a common bank supervisor under its control would need power over all euro-area institutions, countering German Finance Minister Wolfgang Schaeuble’s push to limit central oversight to systemically important firms.
The ECB must be able to assert control over all banks in participating countries, even if the system is set up "in a very decentralized way," Constancio told EU finance chiefs.
Luxembourg, Finland and the Netherlands have also sought changes to the EU’s initial plan to grant the ECB broad powers.
The plan has also drawn skepticism from countries outside the 17-nation euro area. Sweden’s Anders Borg said there might be a need for "technical treaty change" if the new supervisor is housed at the ECB with the potential to supervise banks outside the currency bloc, as proposed.
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