EU leaders agree on legislative framework for eurozone bank supervision

Euro sign

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The European Union (EU) member states leaders agree upon a legislative framework for a single supervisory body for eurozone banks. 

The supervisory responsibility will be given to the European Central Bank (ECB), which will have the power to intervene in any bank within the eurozone.

Germany has been, however, at odds with the European Commission over the scope of the ECB supervision, demanding that only the biggest "systemic" banks should be under direct supervision. Other banks should be according to German Chancellor Angela Merkel supervised "indirectly, via national authorities". 

With the new powers, which will be strictly separated from the bank's role in setting monetary policy, the ECB will be able to intervene early and prevent thus dangerous accumulation of debt on eurozone banks' balance sheets. 

The move to bring banks under bloc-wide supervision was agreed upon at the October European Summit, which, however, failed to pin down the exact date of the implementation of full banking union. 

As German Chancellor Angela Merkel said, the EU needs "quality before speed" and a watchdog "worthy of the name". 

The European Stability Mechanism (ESM), designed to directly inject capital into troubled eurozone banks, will be able to recapitalize struggling lenders only after the new supervisory arrangements are in place.