LUXEMBOURG — The European Union on Tuesday took another step to shore up its battered banking sector after Britain agreed to new rules placing many of the largest lenders in the euro area under the supervision of the European Central Bank.
The British decision, which was announced at a monthly meeting of the bloc’s finance ministers here, clears the way for the E.C.B. to take over as the single supervisor late next year.
Britain is not a member of the euro zone and its banks will not fall under the control of the central bank, which is expected to have direct oversight of about 130 of the largest financial institutions in countries using the single currency by the end of 2014. Even so, Britain held out for further assurances that its huge financial sector, based in the City of London, would not be adversely affected by the new system.
Britain’s assent is the final hurdle for the supervisory legislation, which will go into force once it is published in the bloc’s official register. The idea is that the central bank will be able to detect problems more rapidly than individual national supervisors. That should help bring issues to light early and avoid the kind of debt crises that have led to a five-year economic slump, driven unemployment to record highs and undermined the single currency.
Compared with their past meetings, the ministers had no immediate crises to address. Amid an atmosphere of relative calm, some European officials could not resist a bit of gloating about how the United States was flirting with a default, the repercussions of which could upset Europe’s weak economic recovery, after browbeating the Europeans about economic mismanagement for so many years.
Full article: E.U. Takes Final Step on Unified Bank Regulation (NY Times)