BRUSSELS — European Union legislators on Thursday overwhelmingly approved a law that puts about 150 of the eurozone’s largest banks under the scrutiny of the European Central Bank.
The vote on the legislation, which contains provisions that would give the European Parliament greater oversight of the ECB when the bank assumes its newly won authority, is an important but not final step in a winding process that began in early 2012, during one of the most fevered periods in the eurozone financial crisis.
On the heels of the approval, the so-called single supervisory mechanism is expected to start work during the autumn of 2014 after the European Central Bank conducts a “stress test” on the lenders coming under its aegis. The idea is that the central bank would do a better job than national supervisors of nipping financial problems in the bud so that governments do not need to resort to bank bailouts that destabilize the euro and penalize taxpayers.
The approval was also the first step in a multistage process toward a broader, pan-European vision of banking being referred to as a banking union. The next stage of that effort — creation of a single system for shutting down or restructuring banks — is underway. But progress has been slowed by the reluctance of Germany to commit to a unified banking system that could lead to eurozone member nations being responsible for one another’s debts.
Even so, Thursday’s approval was among the “most important votes of this parliamentary term,” Michel Barnier, the EU commissioner overseeing financial services, told lawmakers after the vote. The law will help to “improve and restore confidence our citizens have in our system, as well as the confidence of the rest of the world in our system,” he said.
Lawmakers had delayed the vote, originally scheduled for Tuesday, amid demands for more power to oversee the central bank.
The approval came only after the president of the Parliament, Martin Schulz, told members that ECB president Mario Draghi had agreed to “strong parliamentary oversight” resulting in “a high degree of accountability.”