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, according to dpa. 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. "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 (49 billion dollars) or 20 per cent of gross domestic product - allowing Germany's small, regional banks to stay under national oversight. "We have achieved the essential points to create a European banking supervisor that is to begin work in German Finance Minister Wolfgang Schaeuble said. The regulatory framework is to be set up by March 1, 2013, enabling the supervisor to start work one year later, a delay of three months on the originally envisaged timetable. The ministers also agreed on complex voting procedures to ensure that non-euro members wanting to join the supervisor body would not be at a disadvantage. They also won the support of Britain - one of few countries with no plans to join the euro - by ensuring that euro "outs" retain their influence in the European Banking Authority, a regulatory agency involving all 27 EU member states. The agreement came hours before a Brussels summit of EU leaders, who had put pressure on their ministers to agree to a framework by the end of the year. "This is just a first stage," said EU Commissioner for market regulation Michel Barnier, adding that they would present plans next year for a common bank resolution body, which is the next step towards banking union.
