EU bank supervision fully on line by 2014: ECB's Nowotny

Europe's new unified banking supervision system should be fully functional for big banks by the start of 2014 but could begin earlier in individual cases, such as for Spanish lenders, European Central Bank Governing Council member Ewald Nowotny said on Friday.

"I think what has been decided is a realistic and reasonable approach," he told reporters on the sidelines of an investment conference, but said it would take some time to deploy fully.

"It takes a significant amount of time for the implementation in practice. That is a very important point for the ECB because the ECB must do its utmost to avoid risks to its reputation," he said.

European Union leaders took a big stride towards establishing a single banking supervisor for the euro zone, agreeing it would enter into force next year, opening the way for the bloc's rescue fund to inject capital directly into ailing banks.

European Council President Herman Van Rompuy said the 27 leaders agreed at a Brussels summit to adopt a legal framework by the end of this year giving the European Central Bank overall responsibility for banking supervision.

Nowotny said: "It is now foreseen that the whole thing will be fully functional from January 1, 2014. I personally could imagine that one can find individual solutions for individual problems (earlier)."

He said for example he could imagine using external advisers to monitor Spanish banks for a transitional period, saying any help for the Spanish financial sector had to be coordinated with the euro zone's ESM permanent bailout fund.

(Reporting by Michael Shields; editing by Patrick Graham)