IRELAND’S PRESIDENCY of the Council of the EU has reached a provisional deal with the European Parliament on setting up a new banking supervisor to work across the Eurozone.

The deal copperfastens agreement reached between member states last year, when it was decided that the European Central Bank and national central banks would split the task of regulating banking activity on a pan-continental basis.

The establishment of a common European supervisor is considered a major factor in the EU’s plan to overcome the financial crisis, and to ensure that further questions over the running of European banks cannot emerge in future.

The deal is also important for Ireland, as the establishment of a single banking supervisor is a precursor to any deal where the Eurozone’s bailout fund, the European Stability Mechanism, could take a direct part in bailing out struggling backs – removing some of the financial obligations from national governments.

Once this is in place, European governments can discuss whether the relatively unique circumstances of Ireland’s bailout – where the country could not afford to support its oversized banking sector – mean it should be given the chance to sell its banking stakes to the ESM.

The agreement with the European Parliament ensures that the agreement reached by individual states last December will not be blocked by MEPs.

Today’s deal gives the Parliament the right to pick the Chair and Vice-Chair of the supervisory board which will oversee the regulation of the European banks.

“The Single Supervisor is the core element of banking union and a vital step in breaking the vicious link between the banks and the sovereigns,” said Ireland’s finance minister Michael Noonan, who currently chairs the ‘Ecofin’ council of EU finance ministers.

“Restoring confidence in the supervision of European banks couldn’t be more important in bringing stability to Europe.”

Read: EU leaders agree on bank supervision