200 of the biggest eurozone banks will come under the direct authority of the European Central Bank after an agreement was reached amongst EU finance ministers this morning.

The agreement is the crucial first stage in forging a banking union, which it is hoped will bolster the eurozone and prevent another currency crisis. German Chancellor Angela Merkel commented, ‘The importance of the deal cannot be assessed too highly.’

The ECB would mostly regulate cross-border systemic lenders and state aided institutions (c.150-200 banks), with powers to delve into all 6,000 in the event of problems.

The backing of the European Parliament is now required to finalise the legal framework, before the ECB hires staff and develops a strategy. Supervision from the ECB won’t be fully operational in March 2014.

Neither Britain nor Sweden will be joining the Banking union.

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