A meeting of European finance ministers that dragged through the night hammered out a compromise deal on a single supervisory mechanism for the Eurozone's largest banks - a fundamental step towards a full banking union - hours ahead of an EU summit that starts in Brussels on December 13.
Following months of strained negotiations the EcoFin meeting finally agreed to give the European Central Bank (ECB) new supervisory powers over Eurozone banks. "We have reached the main points to establish a European banking supervisor that should take on its work in 2014," German Finance Minister Wolfgang Schaeuble said after the 14-hour talks ended shortly before dawn, according to the BBC.
Berlin has been holding out for months, insisting that its thousands of smaller banks should remain under the supervision of the national regulator. Under the deal, banks with more than €30bn in assets will be placed under the oversight of the ECB.
The deal also gives the ECB powers to close down banks that don't follow rules, as well as paving the way for eurozone rescue funds to come to the aid of struggling banks - another issue that has Germany tense, and promises many more bumps in the road before a full banking union is agreed.
Schauble told the meeting that one of the key purposes of the reform - allowing common resources in the Eurozone's €500bn rescue fund to be injected directly into ailing banks - is out of the question until well into 2014, reports the Financial Times.
"We are ready to get a final decision at least before Christmas," said Schauble, before adding: "Again and again we have created expectations we cannot fulfill and that is very dangerous. We should be modest."
Assuming the European Parliament approves the banking supervisor deal, the ECB should begin its task of monitoring Europe's largest banks from March 2013. It would be responsible for up to 6,000 banks from January 2014.
"Piece by piece, brick by brick, the banking union will be built on this first fundamental step today," said EU Commissioner Michel Barnier.
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