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The overall aim is to restore confidence in the banking sector/XINHUA-File

Kenya

EU strikes deal for eurozone banks watchdog: official

The overall aim is to restore confidence in the banking sector/XINHUA-File

BRUSSELS, Dec 13 – European Union finance ministers brokered a deal on Thursday to create a single bank supervisor with powers to close down lenders right across the eurozone, several officials said.

The “historic” agreement, after 14 hours of talks and less than 12 hours from the start of a summit of EU leaders who ordered the marathon preparations.

“As you know it is a key element in our plans to establish a banking union,” said Cypriot Finance Minister Vassos Shiarly, the meeting’s chair who announced the deal at a 4.40am (0340 GMT) press

The “overall aim is to restore confidence in the banking sector, he added, calling the deal a “Christmas present for the whole of Europe.”

The so-called Single Supervisory Mechanism (SSM) will allow eurozone rescue funds to directly recapitalise struggling banks, such as those which failed in Greece and Spain where a burst property bubble left a string of bad debts.

EU Financial Markets Commissioner Michel Barnier told a press conference that the European Central Bank (ECB), which lies at the centre of the new arrangements, would under the new mechanism directly supervise some 200 of the eurozone’s biggest lenders, from the total of around 6,000.

In a clear nod to Germany, despite concerns in London for example of the state of coffers in Germany’s regional banks, only the biggest banks will fall under the ECB’s watchful gaze.

Barnier said that only banks with assets worth more than 30 billion euros will be covered directly by the new supervisory rules.

He said the new mechanism was a “first stage” that would over the course of 2013 be followed up with legislative proposals for a fund to wind-up banks that can’t be fixed and also a cross-border deposit guarantee.

These were additional elements originally suggested in plans for a banking union, a precursor to deeper economic and political integration across the eurozone as an antidote to the debt crisis.

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