Around 200 of the biggest banks will come under the direct oversight¹ of the European Central Bank, which will act as chief supervisor² of eurozone banks.

 

The agreement - a key step towards banking³ union - will be put before European leaders later on Thursday.

 

New rules on prudent⁴ banking are seen as vital to bolster⁵ the euro, as bank failures triggered the financial crash. 

 

 

The measures are also aimed at preventing banking failures ending up on the books of eurozone governments.

 

"We have reached the main points to establish a European banking supervisor that should take on its work in 2014," said German Finance Minister Wolfgang Schaeuble, after 14 hours of talks ended shortly before dawn on Thursday.

 

"Piece by piece, brick by brick, the banking union will be built on this first fundamental step today," said EU Commissioner⁶ Michel Barnier.

 

Under the deal, banks with more than 30bn euros in assets will be placed under the oversight of the European Central Bank. 

 

The ECB would also be able to intervene with smaller lenders and borrowers at the first sign of trouble, the BBC's Europe Editor Gavin Hewitt says.

 

Europe's finance ministers have taken another major step towards closer integration⁷, with a significant transfer of authority from national governments to the ECB, he says. 

 

The EU had already agreed that the ECB would act as chief supervisor of eurozone banks. 

 

But the deal gives the ECB powers to close down eurozone banks that do not follow rules. It also paves the way for the EU's main rescue fund to come to the direct aid of struggling banks. 

 

EU leaders believe that the first stage of a banking union - a Single Supervisory Mechanism⁸ (SSM) - can be put into place without having to change EU treaties. 

 

But there had been some legal doubts about the subsequent stages - a joint⁹ deposit guarantee scheme and a joint resolution mechanism for winding¹⁰ up broken banks.

 

The UK, which is not in the eurozone, will not be joining the banking union but has won some protection against being marginalised when key decisions are taken, our Europe editor says.

 

London is the EU's main financial centre, and handles by far the biggest share of euro foreign exchange transactions. So the UK government is anxious to safeguard the City's powerful role and prevent its business leaching¹¹（沥滤） to a more integrated eurozone.

 

The UK's House of Lords EU Committee said on Wednesday it was "not convinced that an effective banking union could be created within the existing constraints¹² of the European treaties".

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