According to the proposal put forward by the European Commission, the European Central Bank will have the ultimate responsibility on supervisory tasks related to the financial stability of all Euro area banks while national will continue with their role in day-to-day supervision. The proposal also foresees the European Banking Authority (EBA) to develop a Single Supervisory Handbook to preserve the integrity of the single market.

Commission's proposal for a banking union with the euro area includes a regulation which gives the European Central Bank (ECB) increased powers for the supervision of all banks. The ECB will therefore be responsible for tasks such as authorizing credit institutions, monitoring compliance with capital, leverage and liquidity requirements or supervision of financial conglomerates. The bank will also be entitled to carry out early intervention measures on entities under certain circumstances. This regulation also provides for a mechanism to facilitate the entry of countries which are not part of the eurozone.

A second regulation adapts current rules for the European Banking Authority (EBA) to the new provisions on banking supervision ensuring that EBA's decision making remains balanced and safeguarding the integrity of the single market. The mechanism proposed by the Commission provides for a close cooperation between the ECB and the EBA, who will further develop the single rulebook applicable to all Member States and ensuring consistency of supervisory practices.

The package also includes a communication in which the Commission describes its overall vision for the banking union including the single rulebook and the single supervisory mechanism. According to the communication, the next step will involve a single bank resolution mechanism.

This Commission's proposal takes a step further into the objective to consolidate the economic and monetary union as a means to resolve the current crisis in the euro zone, set in June 2012 by the European Council and the Euro area summit. The two proposed regulations should be adopted by the end of 2012 completing the components for an integrated banking union made up by the single rulebook in the form of capital requirements, a harmonized system of deposit guarantees to boost consumer confidence in financial services and the single framework for bank recovery and resolution. The Commission proposes that the single supervisory mechanism should be in place by January 1st 2013.