The European Union is working on a mechanism that will lead to a banking union, but the success of the venture depends on compromise, a senior EU official said on Tuesday.

"The first of element of the banking union is the Single Supervisory Mechanism (SSM)," Peter Bekx, director of international economic and financial relations, global governance, under the European Commission Directorate-General for Economic and Financier Affairs, told China Daily.

"The European Central Bank will, from next year, take on itself the role of the single banking supervisor for all banks in the eurozone.

"The second phase toward an integrated financial framework is a Single Resolution Mechanism (SRM). The EU submitted a proposal for the SRM in July. It's currently under discussion by legislators," he said.

According to Bekx, the rationale behind the idea is that if there is a banking supervision mechanism, a uniform method to bail-out banks in difficulties should also be established.

Under the proposal, a Single Bank Resolution Fund would be set up to ensure the availability of medium-term funding support while the bank was restructured. However, the funding mechanism faces opposition, mainly from Germany, as shareholders, some creditors of the banks and the banking sector will have to bear the burden.

"We hope to finish this before the end of this year. But it will take longer if no compromise is made. It could be delayed to 2014," he said.

Wang Yuqi contributed to this story.