THE EUROPEAN Central Bank (ECB) will take the lead in regulating Eurozone banks, the European Council members agreed yesterday.
But the group failed to come to a deal on what happens to failing banks, which is the next key step in creating a banking union.
Establishing a Single Supervisory Mechanism (SSM) made up of the ECB, in association with national finance regulators, passed after Germany moved to make sure it will retain some control over its banks.
Britain removed its opposition to the setup after it was reassured that UK banks will not be affected.
The rules were meant to come into place next year, but the ECB will only take up this role 12 months after the legislation comes into effect.
“Now it is urgent to put the second leg in place by agreeing the single resolution mechanism fund and the single rule book for bank resolution tools and deposit guarantees,” said European Commission president Jose Manuel Barroso.
“These new rules will help build a stable financial sector, restore fair lending conditions across the EU and ensure that banks, not taxpayers, pay for their own mistakes. We owe it to our citizens to deliver before the European Parliament’s elections in May.”
But more rows are expected along the way as Germany in particular does not want to give other authorities a say over the fate of its banks.