European Union finance ministers have reached an agreement early on Thursday to create a single supervisor for their banks - one of the most significant transfers of authority from national governments to regional authorities since the creation of the euro currency.
Under the deal, banks with more than 30 billion euro (£24 billion) in assets supervised or those that represent a significant proportion of their national economies will be placed under the oversight of the European Central Bank (ECB).
The deal gives the ECB broad powers, including the ability to grant and withdraw banking licences, investigate institutions, and financially sanction banks that do not follow the rules.Perhaps most important is that it paves the way for Europe's rescue fund to directly rescue the continent's troubled banks.
French finance minister Pierre Moscovici said: "It's real progress that opens up interesting possibilities," but did not give a specific date for when the first banks could seek direct aid.
That step is crucial because weak banks remain at the core of Europe's financial problems. Many are teetering on the brink of bankruptcy after the investments they made up in boom times plummeted in value. Some governments have stepped in to save their banks, only to worsen their own finances in the process.
European leaders want to shield troubled governments from the burden of supporting their banks. That would be a huge relief to countries like Spain, which are facing the prospect of taking on enormous debts - and worrying markets - to bail out their banks.
The magnitude of the deal was reflected in the size of the fight. Concerns ranged from which banks would be covered to how the ECB would insulate its monetary responsibilities from the new powers to how the deal would affect EU countries that chose not to submit their banks to the ECB's oversight.
This last point was a major contention: Countries that do not use the euro worried that their voices in the body that creates banking regulation - the European Banking Authority - would be drowned out by the new euro-machine, particularly since countries with other currencies can opt in to the supervision.
The EBA sets all the rules that govern EU banking, and Britain in particular - a non-euro country with Europe's largest banking sector - was nervous that the new supervision would mean all the banks under the ECB would vote together at the EBA, effectively steamrollering everyone else. Ministers reached a compromise that ensures that measures cannot pass in the EBA without at least some support from countries outside the ECB's supervision.
Meanwhile, top central banks are extending their arrangements to swap dollars and other currencies to make sure banks have the money they need. The decision, involving the US Federal Reserve, the European Central Bank, the Bank of England, the Swiss National Bank and the Bank of Canada, extends a crisis measure that was to expire on February 1, 2013.