ECB's Asmussen urges governments to press ahead with banking union

FRANKFURT (Reuters) - Germany's representative on the European Central Bank's Executive Board urged governments on Friday to press ahead with Europe's planned banking union to strengthen the financial system and avert future crises.

Joerg Asmussen's call comes after Germany, backed by allies like Austria, called for a change in the EU treaty to allow for the union, raising questions about how fast it can be implemented.

Asmussen said that for Europe's efforts to calm a four-year old debt crisis it was vital legislation for the first pillar of the new European banking union - the Single Supervisory Mechanism (SSM) - be adopted quickly.

"Swift adoption of the legislative act is now crucial," Asmussen said in a text of a speech prepared for an event held by Brookings Institution and the Center for the United States and Europe ahead of a meeting of G20 financial leaders in Washington.

"Some technical details still need to be clarified. Once that is achieved, I expect the SSM regulation to be formally adopted by the Council and the European Parliament, hopefully around the middle of the year," he said.

Financial markets have calmed since the ECB pledged last July to do whatever it takes to preserve the euro, and then launched a new government bond purchase programme in September. But Asmussen warned about a false sense of security.

He said he still expected the new banking watchdog to start in March next year.

(Reporting by Eva Kuehnen; editing by Patrick Graham)