2012-12-13 07:41:42
European finance ministers have reached a deal on rules for supervising
eurozone banks, ahead of an EU summit.
Around 200 of the biggest banks will come under the direct oversight of the
European Central Bank, which will act as chief supervisor of eurozone banks.
The agreement - a key step towards banking union - will be put before European
leaders later on Thursday.
New rules on prudent banking are seen as vital to bolster the euro, as bank
failures triggered the financial crash.
The measures are also aimed at preventing banking failures ending up on the
books of eurozone governments.
'Core demands'
Shortly before dawn on Thursday, EU finance ministers finalised the deal after
14 hours of talks.
Hours later, German Chancellor Angela Merkel welcomed the agreement, telling
the Bundestag (lower house of parliament) that Germany's "core demands" had
been secured. "It cannot be praised too highly."
She has previously warned against rushing into banking union out of concern
that Germany would face further financial demands.
Significantly, a large number of French banks will be supervised by the ECB but
rather few institutions in Germany will, because of its fragmented banking
industry, says the BBC's Business Editor, Robert Peston.
Start Quote
This deal is a further example of how the eurozone crisis is carving out a new
Europe less from choice but more by the need to survive.
image of Gavin Hewitt Gavin Hewitt Europe editor
Read more from Gavin
European Commission President Jose Manuel Barroso hailed the deal as "a crucial
and very substantive step towards completion of the banking union".
UK Chancellor George Osborne said the aim of protecting the interests of EU
states not signing up to the banking union "has been achieved".
'Significant transfer'
For months, the threshold at which the ECB would act as chief supervisor has
been the subject of strained negotiations.
Under the deal expected to take effect in March 2014, banks with more than 30bn
euros ($39bn; 24bn) in assets will be placed under the oversight of the
European Central Bank.
Eurozone banking deal
ECB to act as chief supervisor of eurozone banks and lenders
ECB to co-operate closely with national supervisory authorities
Direct oversight of banks with assets greater than 30bn euros ($39bn; 24bn) or
with 20% of national GDP
National supervisors to remain in charge of other tasks
Non-eurozone countries that wish to take part can make close co-operation
arrangements
What is eurozone banking union?
The ECB would also be able to intervene with smaller lenders and borrowers at
the first sign of trouble, the BBC's Europe Editor Gavin Hewitt says.
Europe's finance ministers have taken another major step towards closer
integration, with a significant transfer of authority from national governments
to the ECB, he says.
The EU had already agreed that the ECB would act as chief supervisor of
eurozone banks.
But the deal gives the ECB powers to close down eurozone banks that do not
follow rules. It also paves the way for the EU's main rescue fund to come to
the direct aid of struggling banks.
It represents the first stage of a banking union - known as a Single
Supervisory Mechanism (SSM) - which EU leaders believe can be put in place
without having to change EU treaties.
While the European Central Bank will be responsible for the overall running of
the SSM, it will be in close co-operation with the supervisory authorities of
member states and the EU-wide European Banking Authority, which creates banking
rules across all 27 member states.
European media reaction
"An important transfer of sovereignty and a decisive element in the integration
of the eurozone." Beda Romano, Il Sole 24 Ore, Italy
"Excellent news for the euro. It really was high time to take power away from
national supervisory authorities because they were under the influence of
politicians." Ruth Berschens, Handelsblatt, Germany
"By agreeing to this major pooling of sovereignty... the Europeans demonstrate
that they are ready to stick together to support bailouts of bankrupt banks."
Renaud Honore, Les Echos, France
But there have been some legal doubts about the subsequent stages - a joint
deposit guarantee scheme and a joint resolution mechanism for winding up broken
banks.
The UK, which is not in the eurozone, will not be joining the banking union but
has won some protection against being marginalised when key decisions are
taken, our Europe editor says.
London is the EU's main financial centre, and handles by far the biggest share
of euro foreign exchange transactions. So the UK government is anxious to
safeguard the City's powerful role and prevent its business leaching to a more
integrated eurozone.
The UK and Denmark both have formal opt-outs from the euro.
The other EU states still outside the euro are committed to joining, and can
sign up to the banking union in the meantime, although Sweden and the Czech
Republic have made clear they will not.
Deeper integration
A report on far-reaching eurozone integration, by European Council President
Herman Van Rompuy, will be discussed at the Brussels summit later on Thursday.
But EU leaders are likely to avoid any measures that could trigger treaty
change before the European elections in mid-2014, because treaty change is
nearly always a thorny issue for the EU.
It took seven years for the EU to adopt the Lisbon Treaty.
There is strong opposition in Germany and other richer eurozone nations to any
further taxpayer-funded bailouts of indebted banks and governments.