Eurozone Moves Forward On Banking Union

The euro began the week trading near $1.35 after eurozone finance ministers made progress on the region's banking union last Friday. The common currency traded at $1.3487 at 4:28 GMT on Monday morning following news of forward progress on the highly anticipated eurozone banking union. Related:

The region's finance ministers met on Friday to discuss how to implement a public backstop for failing banks once the European Central Bank has taken over as the eurozone's bank supervisor in November 2014. With the ECB set to begin a series of rigorous health checks in the months leading up to the banking union's formation, many worried that several eurozone banks could be in need of rescue when the ECB finds them short of capital.

reported that the agreement eased tension between Germany and the rest of the bloc, as German lawmakers have been against using the ESM bailout fund for that purpose. The bailout fund will only be available to buy stakes in banks if neither investors nor the government are able to raise the funds. The agreement is expected to be adopted as a new law by the end of the year, however the European Union will first have to pass the law after it passes through the European parliament. With the decisions still up in the air, senior bond holders or large depositors shouldering the burden of a closing bank is still a possibility. In order for the law to move ahead, German lawmakers will need to amend the country's current law, which forbids the ESM from directly recapitalizing its banks.