LUXEMBOURG - EU finance ministers were set Tuesday to take a key step towards a new bank regulatory framework with final clearance of a single supervisor regime.

"We are set to finally approve the Single Supervisory Mechanism today," Lithuanian Finance Minister Rimantas Sadzius said. Once approved, the SSM will formally "enter into force in November next year," Sadzius said, as he arrived to chair a meeting of the 28 European Union finance ministers. The SSM was originally supposed to start early next year but the timetable slipped amid sharp differences over its precise role and especially over how it would relate to non-euro countries.

Non-euro Britain is home to the European Banking Authority, which is supposed to draft the rules for all banks in the EU, while the SSM is to be run by the European Central Bank. To ensure that the 17 eurozone members did not out-vote the 11 non-euro members also grouped in the EBA, London got agreement in December that there would have to be a 'double majority' in both camps for any action.

London has won fresh assurances this would be the case, so clearing the way for the SSM and ultimately the Banking Union structure. "This represents a decisive step towards the Banking Union," a draft of the closing statement said. Ministers reaffirmed the key principle of "non-discrimination" between euro and non-euro states, it added. ECB executive board member Joerg Asmussen said SSM approval means "we can now start the real work -- hire people, rent a building ... all the practical things to be ready to start working in one year."

The SSM is to be complemented by a Single Resolution Mechanism to close failing banks and a Deposit Guarantee regime to protect savers. Combined, this will provide the comprehensive, single regulatory framework intended to avoid any need for taxpayers to have to fund the disastrously expensive bank bailouts which led to years of austerity and recession in the eurozone.

The SRM however is proving even more controversial than the SSM, with many member states including powerhouse Germany reluctant to cede too much control over their banks and concerned about how it should be financed.

German Finance Minister Wolfgang Schaeuble was notably restrained.

"We have made a step forward by deciding -- probably -- the legal basis for the SSM," Schaeuble said. "Now we have to make sure to decide on the other legal issues as soon as possible," he said.

Jeroen Dijsselbloem, Dutch finance minister and head of the group of 17 eurozone finance ministers, said "some countries are still debating about the legal base so I have to convince them or find another solution."

Question over paying for bank closures

As the debate twists and turns, an immediate practical issue concerns "backstop arrangements" to pay for potential bank closures until the SRM begins its work, most likely in several years.

One option being discussed is to tap the European Stability Mechanism, the 500-billion-euro eurozone bailout fund which has been used to help Spanish banks.

However, it is unclear how this would work in practice and especially if a member state seeking such ESM help would also have to accept tough economic policy conditions as in a full debt bailout.

Sweden's Anders Borg said ministers "first and foremost must clarify backstops" before the ECB completes tough asset tests on the banks next year to pave the way for the SSM to begin its work.

The tests are supposed to be much tougher than previous reviews which critics say failed to pick up problems at many banks and should give a clear indication of whether they need fresh capital.

If they do, new rules require governments to progressively 'bail-in' private creditors and uninsured larger depositors.

If that is not enough, then state aid is the next option while the EMS is also another possibility -- but with the conditions that involves.

EU Economic Affairs Commissioner Olli Rehn said last week state aid would be acceptable and would not count against deficit and debt targets, an important concession.