EU steps toward banking union

The deal on banking supervision was struck in Brussels on Tuesday between the parliament and both the European Commission and negotiators representing European Council finance ministers.

European leaders last year struck a deal to strengthen bloc-wide oversight of banks, with the details to be thrashed out by various EU institutions, such as the legislature.

"This is a first fundamental step toward a real banking union which must restore confidence in the eurozone's banks and ensure the solidity and reliability of the banking sector," said EU Internal Market Commissioner Michel Barnier.

Under the plan, the European Central Bank would have oversight of Europe's biggest and most interconnected banks, while national authorities would supervise the rest.

Negotiators for the parliament made several amendments to the legislation, including greater accountability for the supervisor and also improved access for the European Parliament and national parliaments to bank documents.

"Crucially, the agreement reached today will provide for strengthened democratic accountability under the proposed system," said Germany's Sven Giegold, a Green party representative responsible for making the amendments.

Hopes of future stability

The deal comes as investor confidence in banks plummeted in light of a controversial levy on bank accounts, proposed as part of a financial bailout deal for Cyprus. EU officials hope that ECB supervision will help prevent future sovereign debt and banking crises.

"This vicious circle, where banking and sovereign debt mutually reinforce themselves, is largely responsible for recession, poverty and unemployment in many countries," European Parliament President Martin Schulz said.

Schulz, however, added that EU-wide supervision itself would not be enough, saying "the deeply distressing problems faced by Cyprus show how insufficient this step is in itself."

The European Parliament as a whole is to be asked to ratify the proposals in the near future.

rc/jlw (AFP, AP, dpa)