EU moves forward on cross-border financial watchdogs

13th July 2010, Comments 0 comments

European efforts to create cross-border watchdogs for the financial industry moved forward Tuesday after British fears over the powers to be entrusted to the new agencies were eased.

European finance ministers meeting in Brussels handed Belgium, which holds the EU's rotating presidency, a new mandate to negotiate with the European parliament in the hope of getting a vote in September.

The creation of the EU-wide agencies is a key plank in European efforts to prevent a repetition of the 2008-2009 financial crisis, which was blamed on the excessive risk taking of banks and investment funds.

But efforts to set them up have dragged on because EU states and lawmakers have butted heads over how much power should be given to the new supervisory bodies, which would oversee banks, insurers and markets.

Britain, home to one of the world's biggest financial centres in London, has insisted that decisions of the pan-European agencies should never interfere with a state's fiscal sovereignty.

"We made considerable progress on the whole issue of supervision," British finance minister George Osborne told reporters after the meeting.

"We absolutely maintained the importance of decisions not impinging on the fiscal sovereignty of member states," Osborne said.

The new entities, however, would have the power to intervene if a domestic oversight agency or firm violated European Union law, he said.

"The powers of the European agencies are focused on areas where there is dispute about a point a law, rather than allowing them to become involved in day-to-day supervision or second guessing the discretion of national supervisors," Osborne said.

The council of finance ministers also agreed that the banking supervisor would be based in London, Osborne added.

The European parliament put off a vote on the supervisory bodies last week in order to give more time to negotiators and officials hope the new agencies can be activated in early 2011.

"I am particularly happy that we were able to agree on a new mandate," said Belgian Finance Minister Didier Reynders, adding that negotiations with EU lawmakers would continue on Wednesday.

European financial services commissioner Michel Barnier said negotiators were building a "dynamic and credible compromise" and that a new mandate for Reynders included elements from parliament proposals.

"We are on the right path, on the final stretch, but not at the finish yet," Barnier said.

German Finance Minister Wolfgang Schaeuble said he was "optimistic" that a deal can be reached with EU lawmakers during the summer.

© 2010 AFP

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