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EU summit plans to overhaul financial supervision

(Xinhua)
Updated: 2009-06-18 14:13

While another unsettled issue proves to be more controversial, which concerns micro-supervision of cross-border banks and insurance firms.

According to the draft plan, colleges of national supervisors should be established for each transactional group. They should exchange relevant information regarding their monitoring activities and cooperate to settle financial issues.

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In the case of diverging opinions between national supervisory authorities over the proper enforcement of EU legislation, or in the case of diverging opinions within a college of supervisors, the ESAs should mediate and as last resort, settle the dispute through a binding decision.

Britain, a financial powerhouse, fears this would give too much regulatory power to the EU over the City of London, alleging the approach could impinge on member states' fiscal responsibilities since it is national government that pays for possible failure of big financial firms.

Internal Fight Expected

Ahead of the EU summit, British Treasury Minister Paul Myners warned that London would strongly defend the principle of keeping national supervisors for financial institutions.

"What we could not live with is an agreement at a European level that would have had domestic fiscal consequences for domestic governments," he said. "That is why supervision of individual institutions must remain a matter for national supervisors. We will strongly defend this principle."

But a senior French official said on Wednesday that British Prime Minister Gordon Brown is almost powerless to stop the creation of a European regulatory machinery.

"They cannot be quite isolated within Europe and at the same time refuse to accept for the City of London the kind of rules being imposed on Wall Street itself. There will be a pincer movement on Britain," said a key aide to French President Nicolas Sarkozy at a pre-summit briefing.

France has lined up with Germany to push the reform, which also enjoys support from most EU member states.

If EU leaders endorse the plan, the commission is scheduled to make legislative proposals in autumn and aims to have the rules in place next year.

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