UPDATE 1-Banking union needs treaty change in long-term -Bundesbank
* ECB statutes would need to be changed in long-term
* Should solve bank resolution nationally in mean time
* Banking union cannot solve crisis alone, need economic reforms (Adds detail on treaty change and ECB statutes)
By Eva Taylor
FRANKFURT, Sept. 16 (Reuters) - Closer integration of the European financial system with a cross-border body to wind up or restructure failing banks will require a change of the EU treaty eventually, the Bundesbank's vice president said on Monday.
Sabine Lautenschlaeger, in charge of banking supervision on the Bundesbank board, said plans for common bank supervision under the European Central Bank and a single resolution mechanism were not sufficiently backed by the EU treaty and the ECB statutes.
"For a permanent and consistent solution an appropriate foundation in primary law is needed," Lautenschlaeger said at a conference, acknowledging that treaty change would not be easy.
Her comments come after EU officials said over the weekend that Germany was working on a plan that would allow progress on euro zone banking union without changing existing EU law, a process that could take years.
The EU parliament cleared the way last week for the start of the new banking supervision in the second half of next year. Lautenschlaeger criticised the limited influence of the ECB Governing Council in the new body's decision making process.
To put this set up on a sounder legal foundation, a change of the ECB statutes was needed, she said.
The creation of a mechanism for how to wind down non-viable banks is still under discussion. Citing possible conflicts of interest, Lautenschlaeger spoke out against the European Commission's proposal that it should be in charge of bank resolution.
ECB President Mario Draghi said at a German industry event in Berlin that a banking union was expected to help banks' return to health and stressed the importance of having one resolution mechanism only.
"Banking union should help speed up the repair of banks - that is if, as I hope, we end up with a strong single resolution mechanism," Draghi said.
"We need a mechanism that allows non-viable banks to be wound down without financial stability risks, as we see in the U.S."
Lautenschlaeger suggested national backstops could be relied upon until a more suitable solution was found. Everybody should be responsible for their own actions until a sustainable fiscal and economic union was created, she said.
Banking union could not be the sole answer to the crisis, she said. Economic and fiscal reforms by individual countries were also needed to make the currency union more stable. (Editing by Mike Peacock)