Delays loom for bank reforms in eurozone

The European Commission's attempt to overhaul the bloc's banking system is set to be delayed by a legislative logjam in Brussels.

Jose Manuel Barroso, Commission president, right, has planned a number of directives and regulations to "make sure that banks in the euro area stick to sound financial practices" in the wake of the eurozone crisis.

On Friday, a path to banking union was agreed by European leaders. A banking supervisor is to be set up next year. But many of the necessary reforms are tied up in measures being debated in the European Parliament's committees. Politicians in Brussels say that there will not be time for all the plans to be scrutinised by the new year, which is the target deadline for many to be settled. A source close to negotiations said that there would be at least a six-month delay.

The proposals include so-called "living wills" so that failed banks could be wound down in an orderly manner; a deposit guarantee scheme; and the implementation of the Basel III rules, forcing banks to hold more capital.

Also delayed is a directive forcing insurers to hold more money so that they are not bankrupted by natural disasters.

A banking expert said: "Clearly there is a very strong political will to get all of this done as soon as possible. On the other hand, some of this is controversial and that will push everything into next year."

Peter Skinner, a Labour MEP on the Economic and Monetary Affairs Committee, said: "Banking union is going to happen and is probably a good thing, but we have to look at it properly to what effects it has in terms of the single market."