The course towards establishing a single banking supervisor for the eurozone progressed significantly this week when European Union leaders agreed that the measure would enter into force next year. This step paves the way for the 27-nation bloc’s rescue fund, which is aimed at directing capital towards ailing banks without adding to their host governments’ debts. Since the eurozone’s bailout fund could only be achieved once the ECB effectively becomes the bloc’s banking supervisor, this has been viewed by the International Monetary Fund and various market economists as a key component in transcending the eurozone’s three-year-old debt crisis.
European Council President Herman Van Rompuy confirmed that the 27 leaders agreed to adopt a legal framework by the end of this year in order to provide the European Central Bank (ECB) with overall responsibility for banking supervision at a Brussels summit. He remarked that, “Once this is agreed, the single supervisory mechanism could probably be effectively operational in the course of 2013.”
Whilst Malta has declared itself in favour of the appointment of a single banking supervisor, it nevertheless retained its stance against financial union due to the negative consequences that this would inflict on its competitive advantage in the financial sector.
On a separate note, the summit was not under intense pressure from financial markets, whose efforts seemed to have calmed since the ECB recently pledged to intervene decisively to purchase bonds of troubled eurozone states if this is necessary to preserve the euro.
