Irish Finance Minister Michael Noonan said Tuesday the European Parliament has approved setting up a single eurozone bank supervisor which supporters say will help stop troubled banks forcing their governments to seek bailouts.
Noonan, currently the chair of EU finance ministers, said a provisional deal had been reached with the parliament on the setting up of the Single Supervisory Mechanism (SSM).
Backed by EU countries last year, the SSM is a key element in efforts to stabilise the EU's banking system by preventing banks from becoming so over-extended that their governments risk bankruptcy themselves in the effort to save the lenders from collapse.
"The creation of this supervisor is a major step towards banking union, restoring confidence in the European banking system and building stability across Europe," said Noonan.
It is "the core element of banking union and a vital step in breaking the vicious link between the banks" and member state governments, he added.
Some details about the SSM, which will come under the European Central Bank, remained to be worked out before final approval, however.
Noonan said the agreement notably foresaw a greater role for the European Parliament in top appointments to the supervisory board.
The agreement came hours before the Cyprus parliament was set to vote on the controversial terms of a bailout package that would see it become the fourth eurozone nation to be rescued.
Cypriot banks, which took a huge hit in the EU-imposed Greek debt writedown, could be forced to impose a levy on all but relatively small savings accounts held on the island to unlock a 10-billion-euro ($13 billion) rescue package.
Parliament head Martin Schulz played down the significance of the deal on the bank supervisor however, saying that "the deeply distressing problems faced by Cyprus show how insufficient this step is in itself."