European Commissioner Michel Barnier, who is at odds with Germany over his proposal to give the European Central Bank (ECB) powers to oversee all euro zone banks, said on Thursday he would try to find a compromise with Berlin.

Speaking to reporters in the German capital, the bloc's financial services chief said: "Of course I will work on a compromise with Berlin and other European capitals."

Giving the ECB a bigger role is part of the euro zone's efforts to provide a long-term fix for its sovereign debt crisis, which has been complicated by the bad debts weighing on many of the bloc's banks.

The basis for a compromise would be an extensive decentralisation of banking supervision, Barnier said, while underscoring the need for an integrated overall system in order to restore financial stability in the euro zone.

Chancellor Angela Merkel's government wants the ECB's new powers of oversight to apply only to systemically-relevant or cross-border institutions - a position that got clear backing from lawmakers in her centre-right coalition this week.

But Barnier pointed to banks which had run into difficulty recently and said they tended to be small and medium-sized institutions like Bankia, Dexia and Northern Rock rather than cross-border systemically important institutions.

"That's why, after many consultations, we suggested that it should be possible (for the ECB) to supervise all banks but this will of course functionally be carried out by national supervisors," he said.

"(German bank supervisor) BaFin will maintain its role but there will be a kind of manual for all banks which come under the control of the European supervisor. National authorities will of course be the ones who put the contents of this manual into practice."

Barnier, in visiting Berlin to meet politicians and business groups, said national supervisors would continue to be responsible for protecting consumers and taking measures against money laundering.

Earlier this week Merkel warned against rushing to create a new pan-European bank supervisor under the roof of the ECB, saying it was more important to put a credible watchdog in place than to meet Europe's self-imposed January deadline.

Barnier said Merkel had raised important points but added: "It is a question of credibility to deliver quickly what we promised."

(Reporting by Michelle Martin; Editing by Ruth Pitchford)