Members of the European Union reached a deal in late October to appoint a single eurozone banking supervisor, bringing an end to a longstanding disagreement between France and Germany.
France and the E.U. Commission had been pushing for joint supervision by the European Central Bank to become operational by January 2013. The timing is crucial to member states such as Spain, whose ailing banks will receive financing from the eurozone’s rescue fund only when the oversight mechanism is fully operational.
German Chancellor Angela Merkel, however, had advocated a system that left more control in the hands of domestic regulators and would have given the banking supervisor control over only the largest banks. The E.U. Commission, with the most vocal opposition coming from France, wanted oversight of all 6,000 banks in the 17 eurozone countries.
European Council president Herman van Rompuy announced agreement on the creation of a Single Supervisory Mechanism to oversee eurozone banks, to be established by the end of 2012 and to be fully operational sometime in 2013.
When the agreement was announced, French President Francoise Hollande told a news conference, “We are on track to solve the problems that for too long have been paralyzing the eurozone and made it vulnerable.”