EU's Barroso: ECB should oversee all banks in banking union

"The Commission is presenting legislative proposals for a single European supervisory mechanism," Barroso told the European Parliament.

"This is a quantum leap - the stepping stone to a banking union.

"The single supervisory mechanism proposed today will create a reinforced architecture, with a core role for the European Central Bank," he said.

"Supervision must be able to look everywhere because systemic risks can be anywhere, not just in so-called systemically relevant banks."

The proposed banking union foresees three steps: the ECB firstly getting the power to monitor all euro zone banks and others in the wider European Union that agree to the oversight; the establishment of a fund to close troubled banks; and a fully fledged scheme to protect citizens' deposits across the euro zone.

(Reporting By John O'Donnell; editing by Rex Merrifield)