European lawmakers proposed on Thursday that national regulators should retain the capacity to oversee smaller banks under a new pan-EU supervisory system.
The proposal is an attempt to resolve differences between Germany and the European Central Bank over which lenders are included in the system.
The European Union is undertaking a major overhaul of how it supervises banks, which would give the ECB the power to monitor euro zone banks and others that sign up.
The European Parliament's economic and monetary affairs committee proposed on Thursday that while the ultimate say over banks should rest with the ECB, it could transfer the oversight of smaller lenders to national authorities.
That echoes the position of a group of triple-A-rated countries, notably Germany, which are trying to ring-fence the ECB's remit around systemically important lenders.
The ECB said on Wednesday it was important that it supervise all banks participating in the banking union "to preserve a level playing field among banks and prevent segmentation in the banking system." That would mean it supervised lenders ranging from large European multinationals to small local banks.
However, the European Parliament wants the ECB to have the choice of delegating its supervision of smaller relevant lenders to national authorities.
The ECB would still have the final say, in particular over banks bailed out by either national governments or the euro zone's rescue funds, and banks which are systemically relevant, the lawmakers said.
Their proposal is just one of several steps to a banking union and could still be contested by EU member countries. But it may please states such as Germany, Finland, the Netherlands and Luxembourg, which advocate stronger powers for local regulators in the day-to-day oversight of banks.
While EU governments need a unanimous agreement on the legislation before it can take effect, lawmakers in the parliament are merely consulted on the role of the ECB.
They do however have a binding say over a related proposal to amend the powers of the European Banking Authority, and legislators have said they will use their clout over the EBA to win key changes to the ECB's role.
"I think it's legitimate that all the actors who receive financial aid are put under a common European control," said Sven Giegold, a German Green member of the parliament and one of the main lawmakers behind Thursday's proposal. "If things go wrong, the ECB should still have a full right to intervene."
Mr. Giegold said he wanted the ECB to have the power to prevent any anti-competitive behaviour by bailed-out banks such as preferential interest offers to clients, giving an unfair advantage over banks which did not receive financial support.
In Germany, bailed-out banks like Commerzbank AG are not allowed to be among the three or five cheapest banks, for competition reasons.
The committee's proposal will now go to three-way discussions between the European Parliament, the executive European Commission and the 27 EU member states.
The close ties between some troubled governments and the banks they supervise, and on which they also rely to buy their debt, have dragged both deeper into crisis.
Making the ECB the supervisor for lenders chiefly in the 17 countries that use the euro would be the first of three pillars in a banking union and one that EU leaders, who meet on Dec. 13-14, have committed to complete by year-end.
Longer-term plans for an agency with the ability to wind down banks and schemes to ensure deposit protection would complete it.
The ECB is currently examining the possibility of handing over the power to close weak banks to the European Commission.
Some officials at the ECB are looking at enhancing the job of the EU's Competition Commissioner Joaquin Almunia to give him a permanent and more powerful role in winding up banks. That could widen his remit beyond banks receiving state aid to those too weak to survive.