Europe deepens union; ECB gets new powers
Brussels, December 13, 2012
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.
In an about-turn, German Finance Minister Wolfgang Schaeuble dropped earlier objections that had led him to clash openly with his French counterpart, Pierre Moscovici, last week over the ECB's role in banking supervision.
With time running out to meet a year-end deadline, both sides managed to settle their differences and Germany won concessions to temper the authority of the ECB's Governing Council over the new supervisor.
Agreement on bank surveillance is a crucial first step towards a broader banking union, or common euro zone approach to dealing with failing banks that in recent years dragged down countries such as Ireland and Spain.
The next pillar of a banking union would be the creation of a central system to close troubled banks.
The decision also sends a strong signal to investors that the euro zone's 17 members, from powerful Germany to stricken Greece, can pull together to tackle the bloc's problems. - Reuters