Due to Disagreements EU Governments and the European Parliament are in a Deadlock
European Union finance ministers are under pressure in fixing a compromise with EU lawmakers about the new financial oversight agencies due to be set up at the end of the year. The talks didn't persuade the U.K. to accept the granting of broad powers to the new bodies.
There is a disagreement between EU governments and the European Parliament over how much power the three new pan-EU authorities will have to intercede in a country that is not abiding with the European financial rules properly.
The ministers said that they are all committed to have the new European Supervisory Agencies operating by Jan. 1, 2011. And the respective positions of the ministers and EU parliament have become much closer over the last year, according to the negotiators. But the lack of a decisive breakthrough targeted time of operation may be jeopardize if things will slow down further.
German Finance Minister Wolfgang Schaeuble told reporters, "I am actually confident that if we don't reach an agreement with the parliament today, then we will reach one over the course of the summer by September."
The EU finance ministers did at least agree, during the ECOFIN meeting, to a new negotiating mandate granted to the rotating Belgian presidency, having wider negotiating instructions. "I think the presidency can pick up the negotiations again today in the trilogue with a new mandate. There are fewer points of contention now," Schaeuble said.
Frankfurt lost to London, its rival in hosting the important new European institution. It was in Brussels during the European finance ministers meeting the deal was reached.
London will be the home of the new pan-European banking watchdog, according to Chancellor George Osborne.
Although, the location of two other new authorities - to regulate insurance and financial markets – is still unclear, but they are unlikely to be stationed in London.
"It is in the UK interest, as the home of a great deal of European finance, that there are effective supervisory arrangements," said Mr Osborne.
It was Britain that leads a coalition of countries that are not in favor of the new authorities to have powers to arbitrate directly in a country's banks and supersede a domestic regulator.
Austrian Finance Minister Josef Proell said,"There are still fundamental questions to clarify, the discussion is not over yet, there are certainly different positions but in my view it should be possible with good will and it is necessary."
Under the new compromise paper, the European Banking Authority would still not be able to order measures that compromised the fiscal authority of a national government.
The EU finance ministers also agreed during the meeting - separately - that the head of the European Systemic Risk Board, an over-arching body to assess the development of overall risks to the financial system, should be elected by the central bankers since the body is dominated by central bankers themselves.
Finance ministers also discussed details of banking stress tests due to be published on July 23 of this year. They hope it will assure markets that the region can face more shocks to the economy.
Austria's Proell said he thought the tests "will show that the European banking industry is robust and can withstand future crises."
It is still unclear how much detail banking supervisors will make public on the results of the 91 banks they are testing. The results of individual banks in earlier tests was never published, they have given only a general thumbs up for the entire banking sector.