BRUSSELS, Oct. 19 (Xinhua) -- European Union (EU) leaders said Friday that they would agree by Jan. 1, 2013 on a legal framework for a single European banking supervisory body.
"The urgent element now is setting up a single supervisory mechanism to prevent banking risks and cross-border contagion from emerging," European Council President Herman Van Rompuy told reporters at the end of an EU summit.
"Once this is agreed, the single supervisory mechanism could probably be effectively operational in the course of 2013," he said.
While Van Rompuy and European Commission President Jose Manuel Barroso hailed the progress, many details remain hazy surrounding the regime, which is considered a crucial step in breaking the vicious circle between sovereign debt and banking crisis.
SPEED OR QUALITY?
While some EU members like Spain and France argued for putting the new system in place no later than Jan. 1, Germany and a few others were more conservative.
Speaking to reporters after the summit, German Chancellor Angela Merkel reaffirmed her position that the creation of the mechanism should be done slowly and that "quality must come before speed."
Merkel agreed with European Central Bank (ECB) President Mario Draghi that the installation of this mechanism will take "a certain amount of time."
"He (Draghi) did not specify how many months, but it's not a matter of one or two months. It takes longer," she said.
Swedish Prime Minister Fredrik Reinfeldt said that it is better to get things right than to rush things. These are complicated matters and there are a lot of questions that need to be answered legally, he noted.
At the end of the summit, both Van Rompuy and Barroso declined to give a concrete timeline for a fully-fledged single supervisory body, which is officially called the Single Supervisory Mechanism.
DIRECT BANK RECAPITALIZATION STILL FAR AWAY
Another controversial issue concerns whether a joint bank supervisor will be accompanied by a Europe-wide bailout fund to directly recapitalize ailing banks.
Neither Van Rompuy nor Barroso gave a clear-cut answer to such questions.
French President Francois Hollande, backed by some other EU leaders, would like to see the permanent European bailout fund, the European Stability Mechanism, able to save struggling banks as soon as a new supervisory regime is operating.
But Merkel told the German parliament before leaving for the summit that merely giving the green light to the legal procedure is not enough.
The new system must be "effective and independent of national banking supervision" before the bailout money could be used for recapitalization, she added.
CHALLENGES FROM NON-EUROZONE COUNTRIES
Challenges also arise from non-eurozone countries as the ECB, which covers eurozone member states only, is now expected to play a central role in the supervisory system.
Van Rompuy stressed the need to "ensure a level playing field between member states which are part of the supervisory mechanism, and those that are not. However, he did not specify how to bridge the gap.
Finnish Prime Minister Jyrki Katainen told reporters upon his arrival for the summit on Thursday: "I hope everybody shares the big picture that we should be capable of separating sovereigns from the banking crisis."
"There are some practical challenges still, for instance, how to integrate the non-eurozone countries into the arrangement, and this is very important for Finland," he added.
BRUSSELS, Oct. 19 (Xinhua) -- European Union (EU) leaders have agreed to complete the "legal framework" for a single banking supervisor in Europe by the end of this year, an EU official told Xinhua early Friday.
EU leaders, who have finished their first part of a two-day summit after 10 hours' discussion, had "reached consensus on the goal of completing the legal framework for the new supervisory mechanism by the end of 2012," the official said on condition of anonymity. Full story