BRUSSELS – After 14 hours of talks, EU Finance ministers have taken a key integration step by sealing the banking deal. The agreement, which will be up and running from 2014, represents the first stage of a European Banking Union also known as Single Supervisory Mechanism (SSM).
The deal will empower the European Central Bank (ECB) taking over the responsibilities for the overall functioning of the SSM, which also includes closing down Eurozone banks which do not follow the rules set up by the institution. The ECB will work in close relationship with the national supervisory authorities of member as well as the European Banking Authority. More than 200 of the most influential banking institutions across the continent will come under the newly set supervision of the ECB.
The new Single Supervisory Mechanism has been welcomed by a number of European leaders as a tool to prevent bank failures in the future. German Chancellor, Angela Merkel, saw German “core demands” secured with the new contract.
European Commission President, Jose Manuel Barroso, praised the agreement as “a crucial and very substantive step towards completion of the banking union”. “It shows Europe is sticking to its commitments,” Chief Executive of UniCredit, Federico Ghizzoni, said in an interview for Reuters. ”It’s a more than positive start which will lead to a better circulation of liquidity,” he added.
From a critical point of view, the new treaty exhibits EU members’ national supervisory institutions’ inability to deal with the banking crisis while giving the ECB an unprecedented authority to deal with smaller banks if problems arise.
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