EU finance ministers agreed to the framework for a joint eurozone banking supervisor early Thursday, reaching a deal after more than 14 hours of discussions over the mechanism aimed at restoring confidence in the currency bloc.
The supervisor is intended as a first step towards banking union, and is a prerequisite for the eurozone’s permanent rescue fund to directly aid struggling banks, according to German News Agency (DPA).
“Such a development will enable the vicious circle between banks and sovereigns to be broken,” said Cypriot Finance Minister Vassos Shiarley, whose country holds the rotating presidency of the European Union.
“This is a signal to the rest of the world that you can have faith in Europe, you can have faith in the eurozone,” French Finance Minister Pierre Moscovici said.
The compromise ends months of negotiations that floundered, threatening the timetable of the project, as France and Germany disagreed over issues including the scope of the supervisor and the independence of the European Central Bank, under whose auspices it will operate.
But on Wednesday the two European heavyweights brought a compromise to the table, including measures aimed at separating the ECB’s supervisory capacity from its monetary role, as demanded by Berlin.
In addition, the supervisor will only routinely oversee banks with total assets worth more than 30 billion euros about (49 billion dollars) or 20% of gross domestic product – allowing Germany’s small, regional banks to stay under national oversight.