European Union (EU) leaders have agreed to create a single supervisory body for eurozone banks next year, a crucial step in breaking the vicious circle between banks and sovereign governments, officials say.
European Commission Spokesman Olivier Bailly said there had been an "agreement on a political framework for the end of 2012 and a gradual implementation in 2013" for the new EU single supervisory mechanism (SSM) for banks.
The mechanism allows struggling banks to be recapitalized directly by the currency area's rescue fund without adding to government debt.
EU officials said all 6,000 banks in the single currency area will come under the European Central Bank (ECB) supervision by 2014.
The plan seems to be a compromise between France and Germany, who earlier disagreed over the timing.
EU President Herman Van Rompuy has said the supervisor would allow the euro bailout fund to lend directly to banks.
Confidence in financial markets has been bolstered due to plans adopted to grant oversight powers to the ECB.
Non-eurozone countries are worried that their banks could be disadvantaged in the absence of balance between the ECB and its supervision of eurozone banks, and the powers of other authorities to screen non-eurozone banks.
MN/AZ
