European Central Bank (ECB) President Mario Draghi hailed the "great progress" made "for a better banking union" on Thursday, after the European Union agreed to complete the region's banking union.
Negotiators agreed to create a new agency to shut euro zone banks that are too weak to survive and a fund to help cover the costs, according to a draft agreement.
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All-night talks ended a stand-off between the European Parliament and euro zone countries over the new scheme, completing the second leg of banking union after supervision by the ECB.
"It's a very good agreement, its progress...We need a mechanism which is properly funded and the agreement actually improves on the pre-existing funding, and it's also a clear reference to enhanced borrowing capacity from the market by the fund," Draghi told CNBC on Thursday.
"The decision-making mechanism is also swifter and more operational so it's an improvement on that front too."
Chris Ratcliffe | Bloomberg via Getty Images
Mario Draghi, president of the European Central Bank (ECB)
The details of the compromise are outlined in a draft agreement and were confirmed by people involved in the talks.
Under the compromise reached, a fund made up by levies on banks will be built up over eight years, rather than 10 as originally envisaged. It will also be possible for countries to share 40 percent of the fund from its first year.
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The deal also envisages giving the European Central Bank the primary role in triggering the closure of a bank, making it harder for the new 'resolution' agency to do so and limiting the scope for country ministers to challenge such a move.