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Commission to propose agency for winding down of problem lenders

THE European Commission intends to propose the creation of an agency to wind down problem lenders, the EU's top regulatory official said yesterday as he outlined plans to grant the European Central Bank (ECB) sweeping powers to monitor all eurozone banks.

Regulator Michel Barnier is trying to work out how to deal with situations such as the implosion of Anglo Irish Bank three years ago. This issue is central to his blueprint for a so-called banking union.

But such decisions are usually left to national governments, which have to shoulder the cost. The creation of a central agency might change that.

"I intend to propose further steps later on building on the common supervision," said Mr Barnier, the European Commissioner in charge of financial regulation.

"It is clear to me that we need to create a European resolution authority separate from the supervisor, as part of my commitment to make sure that banks themselves and not taxpayers pay for failing banks."

It is unlikely, however, that a resolution agency would have a remit to close banks outside the eurozone because some countries. such as Britain, are against a banking union.

It also emerged yesterday that bankers are facing a backlash from European Parliament lawmakers determined to cut variable pay as part of a quest to reshape lenders as utilities rather than money-making machines.

Mr Barnier hopes to broker a compromise between parliament members calling for a ban on bonuses and national governments concerned about the impact this could have on competitiveness.

The proposals will be discussed by officials and lawmakers at a meeting on Wednesday.

Irish Independent