EU Members Agree on Bank Supervisor for Eurozone
Created: 2012-10-19 21:26 EST
On Friday European leaders in Brussels took the first step deciding the union’s banking system. This decision is seen as key to resolving euro zone debt crisis that has been plaguing the union for the past three years.
They agreed to create a single supervisor to oversee all euro zone banks starting in 2013.
It's not yet clear what powers that supervisor will have, or how many banks it will monitor. But EU officials said that eventually six-thousand lenders would gradually come under its supervision. Banks receiving state aid will come first, followed by the larger cross-border institutions.
[Francois Hollande, French President]:
"This evening, with the banking union, we managed to get back stability and efficient mechanisms necessary for tomorrow to avoid a banking crisis. I think for the markets and public opinion, for all those who are waiting for Europe to get back on track, it was a good evening."
The banking supervisor opens the way for the euro zone's rescue fund to inject capital into struggling lenders.
The leaders left one of the trickiest issues to the side - what representation non-euro zone banks will get under this new supervision.
Non-Euro Zone countries like Britain are concerned their banks could end up at a disadvantage.
Other obstacles still have to ironed out, but it's the right move for the euro zone, says Angus Cambell from London Capital Spreads.
[Angus Cambell, London Capital Spreads]:
"Politicians aren't known for moving quickly, so what we have seen is obviously things have taken a very long time, but we have seen gradually movement in the right direction, that's the main thing. Is it too late for these measures? Possibly not."
The banking union may be a distant prospect but investors seem to be feeling slightly more positive about Europe's progress.
However, they are still waiting to hear about Greece’s financial situation and see whether Spain will to request a bailout.