European Union countries will examine a plan to allow the ECB to supervise banks in states outside the eurozone alongside those within the currency area, according to an EU document that lays down limits on the central bank's role.
EU leaders agreed to build a new system of supervision led by the European Central Bank, as a step towards a banking union where chiefly eurozone countries would jointly back problem lenders, in a move to underpin the currency. But the plan has sparked concerns among the 10 countries in the wider European Union that do not use the euro that they will be indirectly affected by the ECB's new supervisory powers and put at a disadvantage, whether they join the scheme or not.
For the framework to become reality, diplomats must first find a way to accommodate countries outside the eurozone, such as Sweden or Denmark, who may want to join the scheme. EU officials circulated a document outlining one way to break the impasse, by establishing a supervisory board within the ECB, a body that would play a role in supervising lenders and where non-eurozone members would have a vote.
The banking union would have three major steps: the ECB takes over monitoring eurozone banks and others that sign up; a single fund is created to close down and settle the debts of failed banks; and a comprehensive scheme to protect savers' deposits is established.
Britain and all other members of the European Union must give the green light to the banking union before it can go ahead, an approval that could be delayed or withheld if their concerns are not addressed. The close ties between some troubled governments and the banks they supervise, and on which they also rely to buy their debt, have dragged both ever deeper into crisis.
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