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Diplomats: EU chiefs agree on bank supervisor

By Sarah Dilorenzo

Associated Press

Published: Thursday, Oct. 18 2012 3:20 p.m. MDT

Italian Prime Minister Mario Monti, left, and French President Francois Hollande walk after a bilateral meeting on the sidelines of the EU summit in Brussels on Thursday, Oct. 18, 2012.

Eric Feferberg, Pool, Associated Press

BRUSSELS — European leaders reached agreement Thursday on creating a single supervisor for banks in the countries that use the euro to be up and running sometime next year, German diplomats said.

The deal represents a compromise between the Germans and French, who had been tussling over how best shore up stricken banks — one of the main causes of the Europe's financial crisis. In some cases, like Ireland, failing banks have dragged the governments that tried to save them into bankruptcy. Some fear Spain faces the same fate.

France had been pushing to get all eurozone banks under the supervision of one European body by the end of this year. Once a proper supervisor, most likely the European Central Bank, struggling financial institutions would be able to tap Europe's emergency bailout fund directly.

But Germany is wary of shelling out taxpayer money to banks and has put the brakes on the plan, by insisting that creating the supervisor should be done slowly.

Just Thursday morning, she told the German parliament that "quality must come before speed" in setting up the supervisor.

"There are a lot of very complicated legal questions, and I am not making the issue more difficult than it actually is," she said.

By Thursday night, however, German diplomats said agreement had been reached. The legal framework for a supervisor would be completed this year. The plan will be put into place sometime next year, the two officials said.

The diplomats would only speak on condition of anonymity in order to give details of discussions before an official announcement.

Raf Casert and Robert Wielaard in Brussels and Geir Moulson in Berlin contributed to this story.

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