EU Nations Agree To Eurozone Banking Union
Following months of tortuous negotiations, finance ministers from the European Union’s 27 countries agreed to hand the ECB the authority to directly supervise the eurozone’s biggest banks and intervene in smaller banks at the first sign of trouble.
“This will enable the vicious circle between banks and sovereigns â€“ which has been a salient feature of the debt crisis in Europe â€“ to be broken,” leaders said in a statement following 14 hours of talks.
Cypriot Finance Minister Vassos Shiarly compared the deal to a “Christmas present for the whole of Europe.”
After three years of piecemeal crisis-fighting measures, agreeing on a banking union lays a cornerstone of wider economic union and marks the first concerted attempt to integrate the bloc’s response to problem banks.
“Piece by piece, brick by brick, the banking union will be built on this first fundamental step today,” said EU Commissioner Michel Barnier.
The new system of supervision will be implemented in stages from next year, although Wolfgang Schaeuble, Germany’s finance minister, said that they were aiming for a March 2014 deadline for full implementation.
In a clear nod to Germany, only the biggest banks will be supervised by the ECB as it wields the new supervisory mechanism.
Mr Barnier said that the ECB would directly supervise 200 of the estimated 6,000 eurozone lenders. Only banks with assets worth more than â‚¬30bn will be covered directly; likewise a maximum of three per eurozone member state.
Countries outside the union, including Britain and Sweden, awon safeguards to ensure that the ECB could not ram through rules over the heads of non-members.
Disagreements will be handled by a panel at the London-based European Banking Authority.
Agreement on bank surveillance is a crucial first step towards a broader “banking union,” or common euro zone approach to dealing with failing banks that in recent years dragged down countries such as Ireland and Spain.
The next pillar of a banking union would be the creation of a central system to close troubled banks.
The decision also sends a strong signal to investors that the euro zone’s 17 members, from powerful Germany to stricken Greece, can pull together to tackle the bloc’s problems.