Eurozone agrees ECB banking supervision rules

German Chancellor Angela Merkel in the Bundestag (13 Dec 2012) The German chancellor welcomed the deal hours afterwards in the Bundestag

European finance ministers have reached a deal on rules for supervising eurozone banks, ahead of an EU summit.

Around 200 of the biggest banks will come under the direct oversight of the European Central Bank, which will act as chief supervisor of eurozone banks.

The agreement - a key step towards banking union - will be put before European leaders later on Thursday.

New rules on prudent banking are seen as vital to bolster the euro, as bank failures triggered the financial crash.

The measures are also aimed at preventing banking failures, of the type that happened in Greece and Spain, ending up on the books of eurozone governments.

Hours afterwards, eurozone finance ministers agreed formally to release a long-delayed instalment of 34bn euros (£27bn; $44bn) to Greece over the next few days, with a further 15bn later on. Athens has been waiting for the bailout funding since June.

'Core demands'

It took 14 hours of talks that lasted almost until dawn on Thursday for EU finance ministers to finalise the banking deal.

German Chancellor Angela Merkel welcomed the agreement, telling the Bundestag (lower house of parliament) that Germany's "core demands" had been secured. "It cannot be praised too highly."

She has previously warned against rushing into banking union out of concern that Germany would face further financial demands.

Significantly, a large number of French banks will be supervised by the ECB but rather few institutions in Germany will, because of its fragmented banking industry, says the BBC's Business Editor, Robert Peston.

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This deal is a further example of how the eurozone crisis is carving out a new Europe less from choice but more by the need to survive.”

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European Commission President Jose Manuel Barroso hailed the deal as "a crucial and very substantive step towards completion of the banking union".

UK Prime Minister David Cameron said the agreement ensured "that the single market is protected for countries that are not signing up to the banking union".

'Significant transfer'

For months, the threshold at which the ECB would act as chief supervisor has been the subject of strained negotiations.

Under the deal expected to take effect in March 2014, banks with more than 30bn euros ($39bn; £24bn) in assets will be placed under the oversight of the European Central Bank.

Eurozone banking deal

  • ECB to act as chief supervisor of eurozone banks and lenders
  • ECB to co-operate closely with national supervisory authorities
  • Direct oversight of banks with assets greater than 30bn euros ($39bn; £24bn) or with 20% of national GDP
  • National supervisors to remain in charge of other tasks
  • Non-eurozone countries that wish to take part can make close co-operation arrangements

The ECB would also be able to intervene with smaller lenders and borrowers at the first sign of trouble, the BBC's Europe Editor Gavin Hewitt says.

Europe's finance ministers have taken another major step towards closer integration, with a significant transfer of authority from national governments to the ECB, he says.

The EU had already agreed that the ECB would act as chief supervisor of eurozone banks.

But the deal gives the ECB powers to close down eurozone banks that do not follow the rules. It also paves the way for the EU's main rescue fund to come to the direct aid of struggling banks.

It represents the first stage of a banking union - known as a Single Supervisory Mechanism (SSM) - which EU leaders believe can be put in place without having to change EU treaties.

While the European Central Bank will be responsible for the overall running of the SSM, it will be in close co-operation with the supervisory authorities of member states and the EU-wide European Banking Authority, which creates banking rules across all 27 member states.

European media reaction

"An important transfer of sovereignty and a decisive element in the integration of the eurozone." Beda Romano, Il Sole 24 Ore, Italy

"Excellent news for the euro. It really was high time to take power away from national supervisory authorities because they were under the influence of politicians." Ruth Berschens, Handelsblatt, Germany

"By agreeing to this major pooling of sovereignty... the Europeans demonstrate that they are ready to stick together to support bailouts of bankrupt banks." Renaud Honore, Les Echos, France

"Perhaps those who most understand the underlying ambition are the British, sensing danger for the City, and for that reason they are threatening to escape." Xavier Vidal, El Pais, Spain

But there have been some legal doubts about the subsequent stages - a joint deposit guarantee scheme and a joint resolution mechanism for winding up broken banks.

The UK, which is not in the eurozone, will not be joining the banking union but has won some protection against being marginalised when key decisions are taken, our Europe editor says.

London is the EU's main financial centre, and handles by far the biggest share of euro foreign exchange transactions. So the UK government is anxious to safeguard the City's powerful role and prevent its business leaching to a more integrated eurozone.

The UK and Denmark both have formal opt-outs from the euro.

The other EU states still outside the euro are committed to joining, and can sign up to the banking union in the meantime, although Sweden and the Czech Republic have made clear they will not.

Deeper integration

A report on far-reaching eurozone integration, by European Council President Herman Van Rompuy, will be discussed at the Brussels summit later on Thursday.

But EU leaders are likely to avoid any measures that could trigger treaty change before the European elections in mid-2014, because treaty change is nearly always a thorny issue for the EU.

It took seven years for the EU to adopt the Lisbon Treaty.

There is strong opposition in Germany and other richer eurozone nations to any further taxpayer-funded bailouts of indebted banks and governments.


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  • rate this

    Comment number 319.

    288.The Ship that died of shame
    Have you considered the EU wouldn't be in trouble if it didn't force a currency union? All those billions bailing out the Greece, Ireland etc wouldn't have been needed, FX rebalancing would have increased trade for the southern nations and massive unemployment wouldn't be driving social unrest.

  • rate this

    Comment number 318.

    "for the umpteeth time... What was wrong with a trading block called EEC?"

    I've told you for the 'umpteenth' time. You left out the n.

  • rate this

    Comment number 317.

    Yawn. Heard it all before, got the T Shirt, etc, etc. Red tape, back handers, a nod and a wink and all will be forgotten. Eurozone/Governments will never have control of our financial institutions - even though they may think they have.

    Bets on the next big banking 'issue' ?

  • Comment number 316.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 315.

    "next to Monti, she's [Merkel] the only European politician who actually knows what they are doing."

    Monti will be out in a few months tops.

    A harbinger of things to come for a former DDR pioneer?

    Who's made Germany even more vulnerable to Moscow blackmail by expediently reversing herself and banning all atomic power plants?

    Welcome to GAZPROM, Angela!

    [statism is dead]

  • rate this

    Comment number 314.

    299. BadlyPackedKebab
    ....and I'm a realist !

    Do you work in Brussels by any chance?
    Self- proclaimed realists are generally delusional. And no, I work in London.

  • rate this

    Comment number 313.

    ... The euro has benefited germany hugely,

    In an asymmetric currency space the rich areas do benefit, as you say, but its rarely obvious to them, they just credit the success to how wonderful they are & criticise the poor areas who tend to become poorer claiming its due to profligacy. Exactly the same happens in the UK with the £, just less dramatically.

  • rate this

    Comment number 312.

    @308. powermeerkat
    "Boy, am I sory now I haven't investested in the currency which will become a history in 24 months."
    Well done. It's still not too late, gold will go way above $5,000 an ounce. It has to account for ALL of the currency. It's no where near it. And Silver, is undervalued even more so.

    Every Fiat currency has died, every single one.

  • rate this

    Comment number 311.

    So the statement is "If this is the right course of action for banks in France it will also be the right course of action for Greek, Spanish etc banks" Isn't that like saying of the Euro is right for Germany and France it is also right for Greece etc" How about having just one Eurobank for all. That can never fail because it will be as big as Fanny Mac, Freddie Mae, Lehman brothers. Whoops!

  • rate this

    Comment number 310.

    Financial transactions and banking operations are already global processes.
    My bank gambles with my money globally with banks of other countries.
    We desperately need GLOBAL REGULATIONS on banks.
    Thus, I welcome this EZ-wide act on banking.
    Britain should have been participated in the design of these regulations.
    Now we will have to play by the rules we have not made.

  • rate this

    Comment number 309.


    "...I invested heavily in GOLD when its was under $300.00 an ounce..."


    You Poles and your glittery teeth...

  • rate this

    Comment number 308.

    2 Hours ago

    Lucky you.If you would have invested in Euro you would have made a even bigger profit.As todays exchange rate is 1 € for 1.30 $

    I invested heavily in GOLD when its was under $300.00 an ounce.

    Boy, am I sory now I haven't investested in the currency which will become a history in 24 months.

    Just as EZ itself.

  • rate this

    Comment number 307.

    Is this merely an excuse to have yet another means for keeping bankers rich?

  • rate this

    Comment number 306.


    The MEPs are just a facade (or is that charade?) to give the impression the EU is accountable. The fact is MEPs have no powers.

  • rate this

    Comment number 305.

    This was long overdue.
    The City will be getting cold shivers down their back....

  • rate this

    Comment number 304.

    @295 David Horton
    "Have UK citizens EVER been asked if they want to be part of the European Union in its current form."
    - NO!

    "Have UK citizens ever had the opportunity to vote on whether they agree to the creeping changes that morphed the EEC into the EU?"
    - No!
    Government is a snake. Give it an inch, it takes a mile.

    I thought Adders were the only poisonous snakes in England, I was wrong.

  • rate this

    Comment number 303.

    This is the best thing that has happened to the banking industry in Europe, or even the Western World.

    Banks are too important to the stability of a nation or nations to be left off the leash because they are always taking grave risks and think they are safe in the knowledge that they will rarely be prosecuted for misusing other's hard earned money.

  • rate this

    Comment number 302.

    No David - and we never will

    I think we are stuck between weak, poor quality elected politicians'


    Powerful multinational conglomerates

    Into the gap has re-crept an unelected Bureaucracy - it has found a particularly comfortable bed in europe which is largely made up of countries that have a fairly short history of democracy

  • rate this

    Comment number 301.

    Britain pays more into the EU than we get out.

    Britain gives 0.7% of its GDP away every year to so-called poorer countries, some of whom have enough money to fund their own space programme.

    Isn't it time Britain got its priorities right and used this waste of money making life easier for pensioners and the needy at home?

  • rate this

    Comment number 300.

    Another symptom of decline in Euroland.

    The markets get ever less free, politicians and bureacrats are empowered to "intervene" for all kinds of reasons (but most likely political), and all the time the economy deflates like a balloon after a kids' party.

    Get used to a new era of lower living standards & downward social mobility. It's already entrenched in the US - it's coming to you now.


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