EU leaders reach compromise deal on Eurozone bank supervisor

European Union leaders last night agreed to establish a single banking supervisor for the Eurozone that would enter into force next year.

The legislative framework is to be agreed among member states by 1 January 2013.

"Once this is agreed, the single supervisory mechanism could probably be effectively operational in the course of 2013," European Council President Herman Van Rompuy said in a news conference.

The agreement is that the European Central Bank (ECB) is given supervisory responsibility, with the power to intervene in any bank within the eurozone.

Prime Minister Lawrence Gonzi, who is attending the summit, said that Malta was in favour of the setting up of a supervisor. Malta, he insisted, is however against the setting up of fiscal union as this would harm the competitiveness of the financial sector.

The deal appears to be a compromise between France and Germany, who earlier disagreed over the timing and over the number of banks the ECB would oversee.

While France and the EU Commission wanted joint banking supervision, with the ECB in the lead role, to be launched in January, German Chancellor Angela Merkel insisted that national budget discipline.

The bank supervisory responsibility would be strictly separated from the ECB's role in setting monetary policy.