Germany's private sector lenders want to give broad watchdog powers over all euro zone banks to the European Central Bank to eliminate interference by politicians in banking supervision.

The BDB banking association, which represents big lenders like Deutsche Bank (DBKGn.DE) and Commerzbank (CBKG.DE), says placing national bank supervisors under ECB authority would promote consistent regulation and could be put in place quickly.

"The influence of national politics in supervision would be removed," the BDB said in a paper laying out its proposal for future bank supervision.

The BDB hopes its ideas will feed into the thinking of the European Commission, which is preparing sweeping changes to the way banks are supervised -- including giving oversight to the ECB -- after a series of melt-downs at banks in the financial crisis.

European Union leaders agreed at the end of June to set up a single banking supervisor in Europe as a pre-condition to letting the euro zone's rescue funds directly inject cash into struggling lenders, without lending to a government first.

It is part of a wider EU effort to stop the banking and euro zone debt crisis feeding each other.

The BDB's demand that the ECB regulate all 6,000 euro zone lenders contrasts with the views of Germany's public sector and cooperative banks, who say central supervision is needed only for the 25 big banks that pose a threat to the financial system in the currency bloc.

The ECB would need to set up an independent unit for banking supervision to maintain a clear separation from its monetary policy duties, such as setting interest rates.

Although the ECB would have sole responsibility for supervising all euro zone banks, it could use the former national watchdogs as "ECB country offices", delegating powers to make checks on smaller banks, the BDB suggested.

National banking supervisors in the countries outside the 17-member currency bloc would maintain their independence and current structures, although they could also be free to place their banking systems under ECB supervision voluntarily, the BDB said.

However, there were some problems that would still need to be sorted out, such as the lack of administrative law giving the ECB powers to enforce its decisions over banks, and a mechanism for banks to redress ECB rulings they found unfair.

The BDB also suggested that the ECB could take over the voting rights of its member countries in organisations such as the European Banking Authority or the Basel Committee of bank supervisors, a move that would give the central bank extra heft relative to outsiders such as the UK.