Honohan calls for a European 'banking union'

The Governor of the Central Bank has called for the creation of a European 'banking union'.

Speaking in London this evening, Professor Patrick Honohan says EU funding mechanisms should be used to directly recapitalise banks - describing the failure to do so as a 'missed opportunity'.

He said a centralised EU banking union would have centralised regulation of European banks.

He added that injections from EU funding mechanisms to governments rather than banks inflated their debt - which led to concerns among ratings agencies.

Professor Honohan said a European-level resolution agency should be set-up - to pay bondholders in insolvent banks.