Eurozone bank fund needs credit line, Draghi says

The ECB will be conducting stress-tests of banks across the eurozone in the coming months, as it prepares to become the bloc’s single bank supervisor next year.

“We’ll have to have national backstops in place,” said Draghi, adding that “the role for the national backstops is there and it’s realistic.”

Draghi, who is a supporter of the plan, played down suggestions that the ESM, the eurozone's €500 billion bailout fund, could be a source of funding.

“I am not sure that this is possible within the existing treaty,” he said.

EU financial services commissioner, Michel Barnier, unveiled his proposal for an singe resolution mechanism (SRM) in July.

The commission proposal would create a single system for the winding-up of failing banks and a common eurozone fund to cover the costs. However, Barnier's plan would see the SRM start in January 2015, with the resolution fund being gradually built up over 10 years through a levy on banks worth around 1 percent of deposits, leading critics to comment that a lack of money would reduce the fund to a "paper tiger."

Senior MEPs are also expected to include provisions for a backstop in a draft report expected to be published later this week. Other options could include using the EU budget as collateral.

Negotiations on a single resolution mechanism for the eurozone, the second key part of a banking union, have stalled since the summer, in large part because of the German elections.

Wolfgang Schaueble, Germany's finance minister, is a staunch critic of the plan, but seems unlikely to retain his position in a new coalition government.

The timeline is also tight as policy makers edge closer to next May's European elections.

MEPs on the economic affairs committee are set to adopt their position on the text in November in a bid to maintain the pressure on ministers.