EU strikes deal for eurozone banks watchdog

European Union finance ministers brokered a deal Thursday to create a single bank supervisor with powers to close down lenders right across the eurozone, several officials said.

European Union finance ministers brokered a deal Thursday to create a single bank supervisor with powers to close down lenders right across the eurozone, several officials said.

Cypriot Finance Minister Vassos Shiarly (L), Spanish Finance Minister Luis De Guindos (C) and Portuguese Finance Minister Vitor Gaspar (R) talk prior an ECOFIN Council on December 12, 2012 at the EU Headquarters in Brussels.

The "historic" agreement, after 14 hours of talks and less than 12 hours from the start of a summit of EU leaders who ordered the marathon preparations, was announced by th emeeting's chair and Cypriot Finance Minister Vassos Shiarly.

"As you know it is a key element in our plans to establish a banking union," Shiarly told a 4.40am (0340 GMT) press conference.

He said the "overall aim is to restore confidence in the banking sector" and compared the deal to a "Christmas present for the whole of Europe."

The so-called Single Supervisory Mechanism (SSM) will allow eurozone rescue funds to recapitalise directly struggling banks such as those which failed in Greece and Spain, where a burst property bubble left a string of bad debts.