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Eurozone bank supervision: how it works


Eurozone bank supervision: how it works


The deal reached in Brussels by European Union finance ministers on Thursday to create a single supervisor for the eurozone’s banks is the latest move intended to address a lack of outside confidence in the region in the midst of its financial struggles.

The biggest overhaul of the European banking system since the crisis began comes after months of tortuous negotiations.

The European Central Bank will take on the role of common banking supervisor.

Britain is not part of the deal under which the ECB will monitor the health of, and the risks taken by, the eurozone’s 6,000 lenders, keeping a particularly close eye on the up to 200 biggest.

If one gets into trouble, the ECB will decide whether it should be bailed out or allowed to go bankrupt, with the cost borne collectively by eurozone governments.

This supervision is needed because failing banks have drastically affected some European economies, spreading the debt crisis to governments that stepped in to save their banks.

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