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EU leaders compromise on single euro zone banking supervisor

The banking supervisor, or the Single Supervisory Mechanism (SSM), will be led by the European Central Bank and will have the power to intervene in of the 6,000 banks within the 17-nation euro zone.

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A huge euro logo stands in front of the headquarters of the European Central Bank (ECB) in Frankfurt, Germany. (Ralph Orlowski/Getty Images)

European leaders moved closer to creating a single supervisor for banks in the euro zone on Friday, but the timeline remains unclear.

The Associated Press noted that while leaders meeting in Brussels agreed that their decision on a watchdog would be key to shoring up lenders and giving them access to bailouts, "many observers were struggling to figure out exactly what had been achieved."

German Chancellor Angela Merkel said it was still unclear whether policy makers would meet the deadline to establish a euro zone bank supervisor by the end of the year, Bloomberg reported. "There are complicated questions to clarify and we’ll see in December if we complete it or not," she said. "For now, the political will is there."

The BBC reported that a legislative framework would be in place by Jan. 1, with the body starting work later in 2013, but Bloomberg said the European Central Bank would become the eurozone's main supervisor on Jan. 1.

The banking supervisor, or the Single Supervisory Mechanism (SSM), will be led by the European Central Bank and will have the power to intervene in the 6,000 banks within the 17-nation euro zone, according to the BBC. The Germans were pushing for limiting the scope of the supervisory body to the biggest, "systemic" banks.

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"It is good for Europe that we'll have a single supervisory mechanism up and running in the course of 2013," said Herman Van Rompuy, president of the European Council, on Friday, according to the AP.

The AP noted the statement went a step further than the statement adopted by EU heads of state, which only committed to getting a plan for the banking supervisor in place by Jan. 1 and getting it up and running in 2013.

A French source told Reuters that the supervisor could start injecting capital into troubled banks as early as the first quarter of 2013, but a German source said it was "very unlikely" to happen that soon.

When the ECB becomes the euro zone's banking supervisor, it will pave the way toward bailing out troubled banks without adding to their host government's debts, Reuters noted.

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http://www.globalpost.com/dispatch/news/regions/europe/121019/eu-leaders-compromise-single-eurozone-banking-supervisor