Agreement reached on single supervisory mechanism

Tuesday 19 March 2013 14.41
The European Parliament has agreed to a compromise package on banking union
The European Parliament has agreed to a compromise package on banking union

EU politicians have agreed to allow the European Central Bank to police euro zone banks.

The deal between the European Parliament and member states finalises an accord agreed late last year to give the ECB powers to supervise euro zone banks from mid-2014.

That is a first step to a banking union across the 17-member bloc.

That agreement has been applauded as a step towards integration.

Minister for Finance Michael Noonan, who played a central role in negotiations due to Ireland’s holding of the rotating EU presidency, welcomed the deal.

He said: "The single supervisor is the core element of banking union and a vital step in breaking the vicious link between the banks and the sovereigns."

The deal envisages that banks with assets of €30 billion, or larger than one-fifth of their country's economic output, are supervised by the ECB rather than national supervisors.

The next pillar of a banking union should be the creation of a central system and fund to close troubled banks, rather than leaving it to individual countries such as Cyprus or Ireland to have to manage alone.

However the reluctance of Germany and other economically strong countries to underpin such a fund means it will be hard to set up.

Securing agreement on the SSM was one of the key priorities of Ireland's Presidency of the European Council, which runs until the end of June.