In a vote in Brussels Thursday, the European Parliament’s Economic and Monetary Affairs Committee backed the plan, calling for the ECB to be given far-reaching powers over bank capital and the granting of bank licenses, while saying it should cooperate closely with national regulators.

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 EU is racing to meet an end-2012 deadline for agreeing on how the ECB supervision should work.

The single supervisor would operate throughout the euro area, with nations outside the currency bloc able to voluntarily sign up for ECB oversight.

Sharon Bowles, the committee’s chairwoman, said that finance ministers must reach a deal on the supervisory law at their meeting on Dec. 4 if a final agreement on the legislation is to be achieved by year-end.

National governments “must take responsibility if we don’t meet the December deadline,” Bowles said. Parliament “has delivered on a very tight timetable.”

Oversight Board

The committee also said that members of the ECB’s bank oversight board should be prevented from taking paid jobs with banks for two years after they step down. They sought the power to set up a committee of inquiry if they felt that the ECB’s bank oversight responsibilities were affecting its monetary policy decisions, or vice versa.

Governments must agree unanimously on the legislation before it can take effect. Lawmakers in the parliament are only consulted on the ECB plan, but have binding power over a related draft law to adjust the powers of the European Banking Authority.

Bowles said parliament would use its power over the EBA law as a negotiating tool with governments so that it can shape the ECB legislation. Lawmakers will treat the two proposals “as a package,” she said.

Parliament and Cyprus, which holds the rotating presidency of the EU, have provisionally scheduled negotiation meetings on Dec. 5, 6 and 7 to broker a final deal on the legislation, Bowles said.

Single Supervisor

On the EBA law, the committee backed changes to the authority’s voting rules to prevent the 17 members of the euro area from systematically imposing decisions on nations that stay outside the single supervisory system. Under the plans, the use of one-member one-vote rules in the EBA would be reduced, with more voting based on weighed majority.

The new system would be temporary, and would phase out when less than 5 EU nations remain outside the single supervisor, Sven Giegold, the lead lawmaker on the EBA rules, told reporters after Thursday’s vote.

This solution would balance the “democratic problem” of giving special rights to opt-out nations with the need to address these governments’ fears that they could be marginalized, Giegold said.

The committee also called for the EBA to relocate to Frankfurt from London, as part of a push to centralize financial oversight and rule-making in the German city.

‘Certain Opt-Outs’

“This is not something against London,” Giegold said. “It’s something for a strong common supervisor, which needs to be in one place to be effective.”

Parliament will resist attempts by governments to limit the ECB’s oversight powers, Giegold said.

“All the member states want certain opt-outs,” he said. “Ultimate responsibility for all issues should be with one supervisor.”

Giegold said he also expects difficult negotiations over proposals to give the ECB bank oversight board a steering committee that wouldn’t include officials from national authorities or regulators.