European Central Bank (ECB) boss Mario Draghi has given a sceptical reaction to a German-led compromise on banking union, saying that it could create a regime "that is single in name only."

Speaking at a hearing with the European Parliament's economic affairs committee on Monday (16 December), Draghi urged deputies to agree "a strong and credible resolution mechanism" with ministers.

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The new rule-book should have "a single system, a single authority and a single fund," said Draghi, adding that he was "concerned that the decision making procedures may become overly complex".

"Everybody knows that these decisions must be taken instantly…we can't have hundreds of people debating whether a bank is viable or not," he told MEPs.

EU finance ministers will gather in Brussels this week in a bid to thrash out an agreement on a common resolution mechanism to wind up insolvent banks.

Governments will be required to set up bank-funded national resolution funds over a period of ten years to cover the costs of bank failure, which will eventually be worth around €60 billion. But it is unclear what should happen if a bank failure cannot be covered by the resolution fund.

Berlin has consistently voiced its opposition to the prospect of a single resolution fund, fearing that as the bloc's biggest member state, its taxpayers could be made liable for the debts of all banks across the eurozone.

The latest compromise prepared by the Lithuanian EU presidency would set up an inter-governmental treaty to govern whether countries could have access to each other's funds during the first ten years of the regime.

It would also establish a single resolution board composed of national and EU officials charged with deciding on whether to take a bank into resolution.

For their part, MEPs on the committee will adopt their own negotiating position on the resolution mechanism drafted by Portuguese centre-left deputy Elisa Ferreira on Tuesday (17 December).

Deputies have already signalled their opposition to a treaty which would cut them out of the decision-making process. They are also expected to call for a single fund with a credit line from the eurozone's bailout fund, the European Stability Mechanism (ESM).

The ECB chief said that agreement on the resolution regime was "essential for market perception". He added that the ESM should be used to provide direct recapitalization to banks if needed, also an idea strongly resisted by Germany.

Defending the ECB

Meanwhile, following questions from German deputies, a combative Draghi defended the ECB's Outright Monetary Transactions (OMT) instrument which gives it the ability to buy up potentially unlimited supplies of eurozone government bonds.

Although the Frankfurt-based bank has not yet used the scheme to purchase bonds, it has been the subject of a legal challenge from the German Bundesbank which argues that it goes beyond the bank's mandate of controlling price stability.

"We run monetary policy for the whole of the eurozone," he said, adding that "OMT has been welcomed world-wide as a success."