European politicians have agreed to create new authorities that will oversee multinational firms and settle disputes between national regulators
EU leaders reached a general deal on financial supervision on Thursday night, with Britain's Gordon Brown agreeing to a European System of Financial Supervisors on condition national governments maintained control over the public purse strings, say diplomats.
Britain has lobbied strenuously in recent weeks against European Commission proposals that would give strong powers to three pan-European authorities that could force national governments to recapitalise banks against their will.
Under the deal however, the three European authorities in the areas of banking, insurance, and securities, will get binding powers to oversee and investigate cross-border firms and to mediate in disputes between national regulators.
Mr. Brown also appears to have conceded on the question of who should chair a new European risk council that will monitor the overall European financial system and issue risk warnings where necessary.
European Commission proposals say the president of the European Central Bank would automatically become the chairman of the new European Systemic Risk Council, something Britain had previously objected to as it rules out non-Eurozone members holding the job.
The commission proposals are largely based on a report drafted by a committee of financial experts that was chaired by Jacques de Larosière, a former governor of the Banque de France and managing director of the International Monetary Fund.
Concrete legislative proposals scheduled for this autumn will be broadly guided by the conclusions reached by EU leaders during the summit.
An important issue now is which article of the European treaties the commission uses to draft the legislation, as this will determine whether the proposals are adopted by unanimity or a qualified majority of member states when they vote later this year.
Meanwhile, as EU leaders discussed financial regulation, farmers stepped up their protests outside lighting fires and shouting at the heavy police presence on the streets just outside where the summit was taking place.
Hundreds of farmers from several EU member states wanted to draw attention to plunging milk prices which they say are threatening their survival. Their protest was taken up inside the summit by German chancellor Angela Merkel who called on the European Commission to take action, saying "we need stabilisation measures."