EU makes important step toward banking union

The European Union on Tuesday cleared a major legal hurdle toward establishing a full banking union to stabilize its financial system, just as investor confidence was hit hard by a controversial seizure of a part of all bank deposits in Cyprus, Associated Press reports.

European Parliament lawmakers, the European Commission and national representatives in Brussels reached an agreement on the laws establishing a centralized banking supervisor that will operate under the aegis of the European Central Bank, officials said.

- This is a first fundamental step toward a real banking union which must restore confidence in the eurozone's banks and ensure the solidity and reliability of the banking sector - AP cites EU Internal Market Commissioner Michel Barnier as saying.

This "is the core element of banking union and a vital step in breaking the vicious link between the banks and the sovereigns," said Irish Finance Minister Michael Noonan, whose country currently holds the rotating EU presidency.

The agreement struck Tuesday still needs formal approval by EU ministers.