“European Union finance ministers agreed to put the European Central Bank in charge of all euro- area lenders in a deal that paves the way for the currency bloc’s firewall fund to provide direct bailouts to banks.
The accord marks a step toward tightening integration of the monetary union to stem the financial crisis that emerged in Greece in 2009. The policy makers’ goal was to break a vicious circle that undermined confidence in Europe’s banks.
While the agreement marks a breakthrough, “there are still some thorny issues,” Julian Callow, London-based chief international economist at Barclays Plc, said today on Bloomberg Television. “What about the financing, bank resolution, what about deposit insurance,” he said.
The new supervisor should be ready by March 1, 2014, with about 200 banks automatically qualifying for direct ECB oversight, EU Financial Services Commissioner Michel Barniersaid at 4:30 a.m. today in Brussels after 14 hours of talks. In the interim, the 500 billion-euro ($654 billion) European Stability Mechanism could aid banks directly using its own procedures and asking ECB supervisors to step in, he said.
EU leaders sought common bank oversight to rejuvenate their crisis-management effort. The heads of state and government, who gather in Brussels today for a regular summit, will be looking beyond ECB supervision to other measures needed to break the links between banking woes and sovereign-debt struggles, such as who should pay to stabilize failing banks.”
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