The European Union's economy and finance ministers on Thursday agreed on the legal framework under which the European Central Bank will supervise Eurozone financial institutions starting in 2014.
"Historic agreement on the supervisor!" the European internal markets commissioner, Michel Barnier, tweeted after 14 hours of meetings. "The European supervisor is a big step to having effective and coherent supervision of all banks in Eurozone and participating countries," Barnier said.
The French commissioner congratulated rotating EU President Cyprus and all the ministers for their constructive spirit during the negotiations and for "showing that Europe is capable of acting".
Barnier said the ECB would take on its supervisory role as of March 1, 2014, with a certain flexibility, since it will need a year to prepare the regulations and bring together the necessary personnel, among other tasks.
Eventually, the ECB will directly supervise banks that have at least 30 billion euros ($39.2 billion) in assets or make up more than 20 per cent of their country's gross domestic product - a group of roughly 100 financial institutions.
The ECB will have the right at any time to exercise direct supervision over other entities if it deems that to be necessary or a member state requests it to do so.
European sources said the exact number of countries that will join the banking union is not yet known, but that only three countries have thus far indicated they are not interested: Britain, Sweden and the Czech Republic.
A single banking supervisor and closer European integration in general have been touted by several EU members as the key to resolving a severe sovereign-debt crisis.
Several debt-laden European countries, including Spain, have pushed for the banking supervisor because it would sever the link between struggling banks and governments and clear the way for EU rescue funds to directly recapitalize ailing financial institutions.
"I'm very happy because a few months ago no one talked about banking union, and now there's not only a monetary union but this other union with a single supervisor," Spanish Prime Minister Mariano Rajoy said.
Asked whether the banking supervisor would be set up in time so that European bailout funds being used to rescue ailing Spanish banks can be taken off his government's balance sheets, Rajoy said he was not sure.