Backing grows for one EU bank supervisor A push by EU leaders to create a single supervisor for Europe's largest banks is gaining momentum as support builds for giving the European Central Bank oversight powers in a big step toward "banking union." The leaders of France, Germany, Italy, Spain and Austria are willing to back a powerful supranational supervisor, and a decision to relinquish national control over cross-border banks is being prepared for next week's EU summit, according to senior officials. One said the new-found political impetus was "astonishing." But big political obstacles remain, including the central supervisor's remit over smaller banks and its ability to deploy the EU's bailout fund to inject capital directly into failing institutions. Currently, EU bank rescue loans must go through national governments, adding to their sovereign debt. The European Commission is pressing for the banking union to be established for all 27 member states, which would naturally fit under the supervision of the European Banking Authority, the pan-EU agency based in London, a push backed by some smaller countries outside the euro, whose economies are dominated by eurozone-based banks and whose leaders worry about handing more power to the ECB. "We are not there yet where every member state supports a single supervisor," a senior EU official said. Diplomats said in the short term, progress was less likely on moves towards common deposit insurance, where EU or eurozone states would share the risks of underwriting some €5tn of household deposits. Angela Merkel, the German chancellor, has made plain her objections to "apparently simple ideas about mutualisation." The potential for breakthrough on bank supervision and bailout rules has been partly spurred by negative market reaction to a proposed €100bn bailout of Spain's banks. Because the rescue will add senior debt to Madrid's books, the bailout loans have spooked the Spanish bond market, pushing up borrowing rates to euro era highs again on Monday. Senior officials believe the Spanish rescue highlighted fundamental flaws in the eurozone's crisis fighting tools. François Hollande, the French president, is leading calls for the ECB to take oversight of banks and, when necessary, use the new €500bn eurozone rescue fund, the European Stability Mechanism, to buy direct stakes in struggling banks. Several ECB top officials have publicly backed the thrust of the proposal. Benoît Coeuré, an ECB executive board member, said this weekend "if the ESM could inject capital directly into banks, with strong conditionality and control, this would also help to break the bank-sovereign loop." Ms Merkel has said she is open to pan-European supervision of Germany's two biggest banks but has been resisting changes in the bailout scheme. Berlin has long insisted that bank rescue funds are routed via sovereign loans, so national governments can be held responsible for the rescue's conditions. However, some senior officials believe giving the ECB supervision powers - which can be enacted under the EU treaties through a unanimous vote of member states - would establish the pan-European control structure needed to handle bank bailouts. A special agency, linked to the ECB and ESM, could be established to manage the stakes acquired in banks. Some officials are warning of an over-concentration of power at the ECB, while pointing to legal limitations on its ability to oversee banks with insurance arms. Additional reporting Ralph Atkins in Frankfurt