BERLIN, Oct 9 (Reuters) - European Union regulation commissioner Michel Barnier has suggested the European Commission could act as the bloc's new banking resolution agency for a limited period only, later handing over the role to the European Stability Mechanism (ESM).
His comments, in an interview with German daily Handelsblatt published on Wednesday, signal the Commission could be willing to compromise in order to bring momentum to the stalled banking union project - which aims to establish a framework to deal with stressed European lenders and break the link between indebted countries and their banks.
"We could agree from the start that the Commission would only take on the task of banking resolution for a limited time and we would find another solution for the longer term," said Barnier.
"The bailout fund, the European Stability Mechanism (ESM), could take over banking resolution as soon as it has become a European institution. But for that we would need to change the European Constitution," he added.
Barnier dismissed a proposal, raised by German Finance Minister Wolfgang Schaeuble on Tuesday, that the planned banking resolution agency limit its remit to Europe's largest systemically relevant banks in the same way as the European Central Bank's new supervisory body.
"Small banks can also go bankrupt and in doing so rock the whole system... I don't think much of the idea of leaving the resolution of smaller banks to national supervisory agencies. But it is true that we must find a compromise."
European Union lawyers have raised concerns about banking union proposals, warning that EU law would only allow limited powers to be given to an agency to close or salvage troubled banks.
Setting up such a system raises an array of political and legal complications, including who should decide when an ailing bank must be closed and who pays the bill, an issue of particular concern to Germany, the euro zone's largest economy.