Call to end deadlock on Euro regulation shake-up

European officials have urged the EU’s member states to break a deadlock over proposals to reshape Europe’s patchy system of financial supervision, reports the FT.

They called for a resolution of differences over the powers that should be given to the new EU-wide supervisory watchdogs that will oversee banking, insurance and securities markets.

There are still hopes that a breakthrough will be made before an EU finance ministers’ meeting next week but many diplomats think that the proposals may be finalised in September rather than July.

“We’ve made a lot of progress, we’re in the final straight,” Michel Barnier, EU internal market commissioner, told the European Parliament in Strasbourg. “The ball is in their [the member states’] court to come up with credible proposals”.

José Manuel Barroso, European Commission president, said: “I believe it [a deal] is now within our grasp.”

The timing is important, since EU officials want the new supervisory authorities to be up and running early next year – and a spate of other legislation is working on this assumption. Both member states and the parliament must approve the legislation before it can take effect.

The broad shape of the supervision package is agreed and involves setting up a new “European systemic risk board” to monitor high-level risks to the bloc’s financial system, plus three new “European supervisory authorities” to co-ordinate supervision of the banking, insurance and securities market sectors. Supervision of individual institutions would remain with national regulators.

But, after weeks of haggling, there are still divisions over what powers the watchdogs should have – in particular, the circumstances in which they should be able to overrule national regulators.

UK diplomats are holding out for strong safeguards to ensure that the new supervisory authorities cannot encroach on member states’ fiscal autonomy.