Eurozone finance ministers agree long-awaited banking deal

PanARMENIAN.Net - Eurozone finance ministers have agreed on a long-awaited pact on how to deal with failing banks in the region.It aims to create a 55bn euro ($75bn) fund - financed by the banking industry, over the next 10 years. The fund would be backed by a new agency, which will decide on how to deal with failing banks, according to BBC News.

The deal is part of wider efforts by the region's economies towards building a banking union as they look to avoid taxpayer-funded bank bailouts.

Wolfgang Schaeuble, Germany's finance minister said that by agreeing the deal "we have created the banking union's final legal pillar".

The proposed banking union consists of three parts or the so-called three pillars. These are a common banking supervisor - the European Central Bank (ECB), which will be given the power to monitor the health of, and the risks taken, by all the major banks within the eurozone.

According to an EU proposal, the ECB will "have direct oversight of eurozone banks, although in a differentiated way and in close co-operation with national supervisory authorities". It will also intervene if any of the banks gets into trouble.

The second part is the Single Resolution Mechanism. This means that if a bank anywhere in the eurozone gets into trouble, the process of bailing it out - or even letting it go bust - would be managed by a common "resolution authority".

The final pillar of the proposed unions involves a common deposit guarantee, which means that anyone with an ordinary bank account anywhere in the eurozone would have their money - up to a limit of 100,000 euros ($138,000) - guaranteed by a common eurozone fund.

The 17-nation eurozone is moving to strengthen its banking sector by introducing common rules and protections.

The move has come after the recent crisis forced a number of European governments to spend large sums of money supporting banks whose lending had turned bad.

Over the main years of the crisis, European governments spent 1.5 trillion euros ($2tn) propping up the banks.

The idea of a banking union is to make huge taxpayer-funded bank bailouts a thing of the past.