European leaders have agreed to push ahead with a single supervisory mechanism that will oversee the eurozone banking system to be run by the European Central Bank and come into effect next year.
The mechanism will be designed to “prevent banking risks and cross-border contagion from emerging”.
European Commission president José Manuel Durão Barroso says: “The new supervisor will be able to intervene, if needed, with any bank in the euro area; it will be as inclusive as legally possible for non-euro area member states who want to join and the integrity of the single market will be respected.”
Barroso says deeper integration for the eurozone is urgent.
European Council president Herman Van Rompuy says: “The single supervisory mechanism is a first, essential step toward a complete integrated framework for the financial sector.
“Other steps also need to be taken quickly, starting with harmonising national resolution and deposit guarantee schemes.”
Van Rompuy says there will be a “clear separation” between the European Central Bank’s monetary responsibilities and its supervision functions.
The EU president says if the bloc makes full use of available tools it will mark “a major step towards fiscal and economic union”.
The European Union is also mooting the possibility of member states entering into individual contractual arrangements with institutions on reforms they commit to undertake.
Van Rompuy adds: “All in all, without a stable monetary union, there cannot be a stable European Union. Therefore our goal is to make the euro fully stable – financially, economically, and also politically.”