Europe clears critical hurdle on road to banking union
By Claire Davenport and Robin Emmott
STRASBOURG/BRUSSELS (Reuters) - Europe took a significant step forward in its ambitions to create a single banking framework for the euro zone on Thursday after EU lawmakers granted new powers to the European Central Bank to oversee the currency bloc's banks.
The plan approved by an overwhelming majority of the European Parliament will allow the ECB in Frankfurt to oversee around 6,000 banks in the 17 euro zone countries.
While Thursday's vote completes the last legislative step towards ECB supervision, many more challenging obstacles remain before banking union - which also hopes to establish a single euro zone authority to wind up bad banks - is finalized.
"Today marks a real step forward in setting up a banking union," said ECB President Mario Draghi, adding that the central bank would push ahead rapidly with hiring the staff and building the institutional capacity to supervise the banks.
Banking union, conceived as a three-stage process involving a single bank supervisor, a single resolution authority and a single deposit-guarantee scheme, is the most ambitious project launched since the region's debt crisis and is designed to provide a stronger underpinning to the single currency project.
It marks a new phase of deeper integration among the euro zone countries, but also comes with complex issues of sovereignty, with Germany, the euro zone's most powerful member state, concerned about an over-centralization of powers.
"The single supervisory mechanism is a lynchpin of a deeper economic and monetary union," European Commission President Jose Manuel Barroso said after the vote. "Now our attention must turn urgently to the single resolution mechanism," he said.
After more than three years of financial market turmoil following the bailouts of Greece, Ireland, Portugal and Cyprus, establishing a more unified banking system in the euro zone is seen as critical to defending against future crises. Continued...