MercoPress. South Atlantic News Agency

EU agrees on three new watchdogs for the financial system

European internal market Commissioner Michael Barnier

European Union has reached an agreement on reforms in the financial sector with the creation of a European Systemic Risk Council and three new watchdogs covering banking, insurance and securities markets.

The new watchdogs will have no direct supervisory powers, other than to oversee credit rating agencies, although they will have some additional emergency powers to ban or restrict activities that threaten the stability of the EU financial system. Such emergencies will be called by member states rather than the European Parliament or Commission.

Day-to-day supervision of individual companies will remain the responsibility of national regulators but the new bodies will develop EU-wide harmonized rules.

The move, which comes on the back of Wall Street reforms approved by President Barack Obama, must be approved by European finance ministers and the European Parliament. Further discussions will take place next week and proposals could be put to the European Parliament later this month.

The three watchdogs will be based in London, Paris and a German city.

European internal market Commissioner Michael Barnier said that “the new framework is a crucial stage in our effort to learn all the lessons from the crises to better protect our economy and our citizens in the future.”

Conservative economic and monetary affairs spokeswoman and MEP Vicky Ford, told the BBC that the new structures “will allow better coordination of financial services supervisors across Europe, thus protecting consumers from cross-border crises that we witnessed. At the same time national governments and national regulators keep their frontline responsibility to protect national tax payers’ interests.”

Members of the European Parliament reacted positively to an “agreement in principle” between the Brussels-based assembly and EU member states on the package of measures aimed at supervising Europe's financial markets.

MEP had pressed for the three new financial watchdogs to have substantial powers, but national capitals, particularly London and Berlin, had been reluctant to cede too much authority to the new agencies.

The deal appeared to allay member states' concerns that their national regulatory bodies will be undermined, as the new watchdogs are expected to have only limited direct supervisory powers.