* ECB to take on policing of big euro zone banks
* IMF says more firepower needed for failing lenders
BRUSSELS, June 19 The European Union needs a
strong system in the euro zone to handle big banks that get into
trouble, the International Monetary Fund said on Thursday,
highlighting what many experts see as the weak point of the EU's
The European Central Bank will begin supervision of big
banks across the 18 countries using the euro later this year,
the first step in banking union.
The next step will be a common approach to preventing banks
in trouble from dragging down the governments of euro zone
countries, as happened with Ireland. That step remains a work in
progress. So far, only a small emergency fund exists.
While welcoming 'substantial progress' on banking union, the
International Monetary Fund, which helped bankroll the bailouts
of several euro zone countries, including Ireland, highlighted
"Work needs to continue to establish a common backstop to
sever effectively sovereign-bank links," IMF officials wrote in
their regular review of the euro zone economy. "The current
planned backstop may prove insufficient to break decisively
The IMF said that it should be easier for the euro zone's
rescue fund, the European Stability Mechanism, to help
struggling banks directly, rather than lending money to the
banks' home countries.
It also underscored the need to have sufficient funding to
handle a large bank that gets into trouble.
(Reporting By John O'Donnell; Editing by Larry King)