Europe deepens union with ECB as chief bank watchdog

Thu Dec 13, 2012 7:50am EST
 

By John O'Donnell and Robin Emmott

BRUSSELS (Reuters) - Europe clinched a deal on Thursday to give the European Central Bank new powers to supervise euro zone banks from 2014, embarking on the first step in a new phase of closer integration to help underpin the euro.

After more than 14 hours of talks and following months of tortuous negotiations, finance ministers from the European Union's 27 countries agreed to hand the ECB the authority to directly police at least 150 of the euro zone's biggest banks and intervene in smaller banks at the first sign of trouble.

"This is a big first step for banking union," EU Commissioner Michel Barnier told a news conference. "The ECB will play the pivotal role, there's no ambiguity about that."

The euro rose to a session high in Tokyo of 1.3080 against the U.S. dollar on news of the deal.

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.

The new system of supervision should be up and running by March 1, 2014, following talks with the European Parliament, although ministers agreed that could be delayed if the ECB needed longer to prepare itself.

The plan sets in motion one of the biggest overhauls of any European banking system since the financial crisis began in mid-2007 with the near collapse of German lender IKB.

The onus is now on EU leaders, who meet in Brussels on Thursday and Friday, to give it their full political backing.   Continued...

 
The Euro currency sign is seen in front of the European Central Bank (ECB) headquarters in Frankfurt December 6, 2012. REUTERS/Lisi Niesner