Brussels - European Union finance ministers brokered a hard-fought deal on Thursday to create a single bank supervisor with powers to close down lenders right across the eurozone, several officials said.
The "historic" agreement came after 14 hours of talks and less than 12 hours ahead of a summit of EU leaders who ordered the marathon preparations.
The "overall aim is to restore confidence in the banking sector" and compared the deal to a "Christmas present for the whole of Europe," said the meeting's chair, Cypriot Finance Minister Vassos Shiarly, announcing the deal to the press in the early hours of Thursday morning.
The so-called Single Supervisory Mechanism (SSM) will ultimately allow eurozone rescue funds to recapitalise directly struggling banks such as those which failed in Greece and Spain, where a burst property bubble left a string of bad debts.
EU Financial Markets Commissioner Michel Barnier told a press conference that the European Central Bank (ECB), which lies at the centre of the new arrangements, would directly supervise some 200 of the biggest of the estimated 6 000 eurozone lenders.
In a clear nod to Germany, despite concerns in London for example of the state of coffers in Germany's regional banks, only the biggest banks will fall under the ECB's watchful gaze as it wields the new supervisory mechanism.
Barnier said that only banks with assets worth more than €30bn will be covered directly; likewise a maximum of three per eurozone member state.
Britain, the Czech Republic and Sweden have said they will not join the SSM, and none of the other seven territories that are EU members, but non-eurozone states, opted to do so during the overnight talks either.
The ECB will also be able "call up" banks essentially left under national supervision to be checked by the Frankfurt-based bank, according to a behind-the-scenes official.
Barnier said the planned new supervision was a "first stage" that would over the course of 2013 be followed up by legislative proposals for a fund to wind up banks that can't be fixed and also a cross-border deposit guarantee.
These were additional elements originally suggested in plans for banking union, a precursor to deeper economic and political integration across the eurozone as an antidote to the debt crisis.
Seen as key to taming the debt crisis and putting the bloc back on track, this first step towards the hoped-for banking union, agreed by European Union leaders in June, is scheduled ot be up and running in March, 2013.
Leaders will be able to rubber-stamp the deal at their summit due to start at 15:00 GMT.
"It was laborious, complicated - but now we have an equilibrium," said French Finance Minister Pierre Moscovici after the deal was announced.
Negotiations will begin next Tuesday with the European Parliament.
EU leaders want to tighten supervision as a condition for the bloc's bailout fund stepping in and directly recapitalising banks, instead of passing rescue funds through governments which adds to their sovereign debt loads.
Britain, which will not be joining the new regulatory club, wanted special voting rights that would protect the City of London global financial centre, and officials in Chancellor of the Exchequer George Osborne's entourage appeared happy with the guarantees obtained.
A specially-agreed mediation panel will restrict the scope for the European Central Bank, which speaks for the 17 eurozone states, to dominate contentious decisions affecting non-euro states.
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