BRUSSELS, Dec. 19 (Xinhua) -- European Union (EU) finance ministers on Wednesday reached an agreement on how to build a mechanism to close failed banks, EU Commissioner Michel Barnier said.
The so-called single resolution mechanism (SRM), together with a single supervisory mechanism (SSM) and a single deposit guarantee mechanism, constitutes three pillars of the eurozone's planned banking union for cutting the "vicious circle" between sovereign debt crisis and banking crisis, and make sure taxpayers won't foot the bill for future bank bailouts.
"As the agreement by Member States for SRM has been reached, negotiations with European Parliament can now start," said Barnier, EU commissioner for internal market and services.
Rimantas Sadzius, Lithuanian finance minister, hailed the agreement, saying, "It will be the fastest record in EU history" if the European Parliament approved it in two months "despite many complicated issues involved."
The new agreement includes a backstop to the single resolution fund.
The fund, to be financed by a levy on banks, is poised to garner 55 billion euros (76 billion U.S. dollar) over 10 years.
During the fund's initial build-up phase, bridge financing would be available from national budgets or the permanent eurozone rescue fund called European Stability Mechanism.
The resolution decision will be made by a single resolution board which consists of an executive director, four full-time appointed members and the representatives of the national resolution authorities of the participating countries.
"The board would determine the application of resolution tools and the use of the single resolution fund. Decisions by the board would enter into force within 24 hours after their adoption, unless the Council, acting by simple majority on a proposal by the Commission, objects or calls for changes," said the agreement.
The board would be responsible for the planning and resolution phases of cross-border banks and those directly supervised by the European Central Bank, while national resolution authorities would be responsible for all other banks.
National resolution authorities would be in charge of executing bank resolution plans under the control of the board. Should a national authority not comply with its decision, the board could directly exercise powers to the troubled bank.
The SRM would enter into force on Jan. 1, 2015. Bail-in and resolution functions would apply from Jan. 1, 2016.
Yearender: EU's debt-heavy economies at crossroads as 2014 approaches
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The recent economic signals coming out of Greece, Ireland, Italy, Portugal, and Spain have been mixed. Full story