EU Leaders Agree on Common Bank SupervisionBulgaria in EU | October 19, 2012, Friday // 08:16| views
The European Central Bank (ECB) will be given supervisory responsibility, with the power to intervene in any bank within the Eurozone. File photo
The EU leaders have agreed late Thursday at the Brussels summit to introduce a common mechanism for bank supervision in the Eurozone.
The phasing in of the single supervisory body will be done during the course of next year, while the legislative framework is to be agreed among Member States by January 1, 2013, BBC reports Friday.
The European Central Bank (ECB) will be given supervisory responsibility, with the power to intervene in any bank within the Eurozone.
BBC further reports the deal has been a compromise between France and Germany, which earlier disagreed over the timing and over the number of banks the ECB would oversee. France and the European Commission wanted joint banking supervision, with the ECB in the lead role, to be launched in January.
Under the draft plan, all 6 000 banks in the Eurozone would be included, but Germany wanted it limited to the biggest, "systemic" banks.
The President of the European Commission President Jose Manuel Barroso stated the ECB "will be able to intervene if needed in any bank in the euro area".
German Chancellor, Angela Merkel, on her part, said that the agreement was that "banks must be supervised in a differentiated way. That means that some will be direct... at the ECB level and others indirectly, via the national authorities."
According to BBC, the banking union plan is expected to inflict legal complications, as it would give more powers to the ECB and possibly weaken those of national regulators. There is speculation that it could lead to treaty changes - something that has caused big headaches for the EU in the past.
Earlier, Merkel called for the EU to be given the power to veto Member States' budgets, but her proposal was rejected.
With new supervisory powers the ECB would be able to intervene early on to prevent a systemically dangerous accumulation of debt on a bank's balance sheets.
Once the legal framework is in place, the European Stability Mechanism (ESM) will have the authority to recapitalize struggling banks directly, without adding to a country's accumulated debt.
The expected result is a system that avoids huge taxpayer-funded bailouts like those arranged for Greece, the Republic of Ireland and Portugal.
As the EU leaders praised debt-ridded Greece for the reforms and the implemented austerity measures, the country was gripped by another 24-hour general strike, with at least 20 000 protesters gathering in downtown Athens, clashing with police.
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