Brussels, Belgium (4E) – EU finance ministers have agreed to forge a banking union deal that will give Brussels unprecedented new powers to keep failing banks from damaging the economy.
The deal was finally completed Wednesday after months of heated negotiations when EU finance ministers announced an accord had been reached over principles on setting up a central body, overseen by the European Central Bank, to deal with failing banks.
The ministers agreed to set up the Single Resolution Mechanism that will shut down failing banks before they can do damage to the broader economy. It will work with a new supervisory system to make up the region’s banking union.
The deal, which was announced in the early hours of Thursday morning, was made just ahead of an EU summit and did not include publication of detailed legal texts on how the new structures would work. Discussions between the EU finance ministers lasted over 12 hours.
Another piece of the banking accord establishes a common deposit guarantee system, and it was finalized on Tuesday after an agreement was struck with the European Parliament.
The new banking regime was put in place after the financial and debt crises brought down many banks and nearly put the euro zone in disarray as governments were forced to ask for bailouts after they rescued their banks.