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Banking

EU banking union appears to have overcome impasse

Newspaper reports have claimed a Franco-German impasse over the European Union's planned banking union has been resolved. The ECB's direct supervising powers now seem to be much clearer.

Shortly before a crucial extraordinary meeting of EU finance ministers on Thursday, German and French negotiators reached a compromise on the bloc's planned banking union, according to a report in Germany's "Süddeutsche Zeitung" newspaper on Wednesday.

The report said the deal envisaged giving the European Central Bank all necessary powers to directly supervise each of the so-called system-relevant banks in the 27-member bloc, as well as authority to monitor state-supported lenders. A popular term in Germany, so-called system-relevant banks are those lenders deemed to be of core importance to Europe's financial infrastructure. All other banks would remain under the control of national supervisors, the daily paper said.

Agreeing on a banking union would mean a milestone on the road to the bloc's wider economic union and mark the first concerted effort to integrate the EU's response to problem lenders.

Minimizing future risks

The German "Handelsblatt" business newspaper quoted negotiators as saying that between 60 and 150 banks could be directly supervised by the ECB. It added it was being debated whether those should include lenders with a balance sheet total of over 30 billion euros ($39 billion) and banks whose total assets - everything that savers and investors have stored with or borrowed from the lender - accounted for over 20 percent of gross domestic product (GDP).

Germany and France had previously been at loggerheads over the details of any potential ECB supervision. While France had supported the idea of letting the ECB monitor all EU lenders, Germany had only wanted the larger banks to be supervised centrally.

Berlin has repeatedly cited concerns about a potential conflict of interest between the ECB's double role as supervisor and guardian of the euro. Such a conflict could take shape, if the central bank were to decide to keep interest rates low with a view to propping up banks.

hg/msh (Reuters, dapd)