EU on Cusp of Approving ECB Oversight Plan as U.K. Deal Emerges

The U.K. reached a draft deal with its European Union partners to lift its objections to turning the European Central Bank into a supervisor, according to two EU officials, in a move that paves the way for the end of over a year of negotiations on the proposals.

Ambassadors for the EU’s 28 nations agreed today to put final adoption of the law on the agenda of tomorrow’s meeting of finance ministers in Luxembourg, according to the officials, who spoke on condition of anonymity because the decision isn’t public. Once that takes place, the legislation can be published by the EU, beginning a 12-month countdown for the ECB to fully take on its new role.

European Central Bank Executive Board member Joerg Asmussen said he’s “very, very confident” that EU finance ministers will sign off on the bill tomorrow.

“We are making slow but steady progress on all elements of the banking union, and if we have a sound legal base created tomorrow we really can speed up preparations, can hire people, can hire buildings, so this is really good news on the banking union,” Asmussen told reporters in Luxembourg before a meeting of euro-area finance ministers today.

Britain blocked approval of the law last month on concerns that safeguards to prevent the U.K. from being marginalized in meetings of the European Banking Authority could be unwound. The U.K. lifted its reservations today after receiving support for a declaration stating that voting rules agreed on for the EBA will be respected, a U.K. official confirmed.

Banks and Sovereigns

EU leaders said last year that the ECB should be given oversight powers over euro-area lenders as a first step in building a banking union that would break the links between banks and sovereigns, and so boost confidence in the bloc’s financial system. Michel Barnier, the EU’s financial-services chief, had called for the plans to be legally adopted by the end of 2012.

The decision to send the draft law to finance ministers, with the intention that it be approved without further negotiation, is a sign that the U.K. issue is close to being resolved, the officials said.

Britain has said that it will not sign up its banks for ECB oversight, which is optional for nations outside the euro zone.

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