AIB and BoI to be supervised directly from Frankfurt

It looks as if AIB and Bank of Ireland will both be supervised directly from Frankfurt when the EU banking union comes into operation in Mar 2014, according to the Department of Finance’s Aidan Carrigan.

Mr Carrigan appeared before the Oireachtas Finance Committee yesterday along with other officials from the department and the Central Bank to answer questions about the implications of a new EU banking union for the Irish banking system.

Mr Carrigan said the criteria for direct supervision by the ECB was either a market capitalisation of €30bn or account for 20% of GDP, but it would not be finalised until the methodology is finalised.

Under the proposed legislation there would be a much more coherent approach to banking supervision, which would greatly improve financial stability across the eurozone and generate much more confidence in cross-border capital flows, said the Department of Finance official.

But this was only the first step which had been agreed. EU leaders still have to hammer out details for a deposit insurance scheme and a bank resolution regime. The ECB would act as the supervisory agency but the legislation would be developed by the European Banking Authority and the European Commission.

Fine Gael TD Peter Matthews wanted to know was there enough of the appropriate human capital in place to ensure the proper supervision of the banks. ECB president Mario Draghi said his institution was up to the task, noted Mr Carrigan. Mr Draghi also has the resources of existing national regulators, he added.

Each eurozone member state would have a representative on the ECB board of supervisors. The ECB supervisory board could be brought before the European Parliament for regulatory oversight. National parliaments could feed questions through to the parliament or could request individual representatives on the supervisory board appear before them.

Finance Committee members wanted to know what were the chances of Britain joining the EU banking union and what would be the implications for subsidiaries of British banks in Ireland. Mr Carrigan said Britain welcomed the move but it would not be joining. But if a standalone subsidiary met the €30bn or 20% of GDP criteria in a member state then it would be supervised from Frankfurt.


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