Barroso steps up pressure for bank supervision deal

European Commission President Jose Manuel Barroso today stepped up pressure for an EU summit deal this week on sweeping EU supervision of banks and financial bodies.

EU leaders meet in Brussels on Thursday, with controversial plans on the table to tighten up financial monitoring in the wake of the economic meltdown.

Prime Minister Gordon Brown has warned he will accept nothing which threatens the sovereign role of the City of London - not least the creation, as planned, of an EU body with power to rule over disputes between national financial authorities.

But in a pre-summit letter to EU leaders today, Mr Barroso pleads for support for the new financial "architecture" set out in a report commissioned by Brussels.

The report recommends the setting up of a European Systemic Risk Board (ESRB) - an independent body intended to "exercise macro-prudential supervision over all financial sectors".

If approved by EU leaders, there would also be a "European System of Financial Supervisors" (ESFS), overseeing the monitoring roles of existing national supervisory bodies.

According to the Czech government, the national bodies would become part of a European supervisory authority "endowed with legal personality".

Mr Barroso's letter says: "The architecture I am putting forward offers Europe a comprehensive system of supervision for both systemic and individual risk, building trust, coherence, and consistency and making the most of the independent expertise of the European Central Bank.

"I hope the European Council (EU summit) can give its support to the basic design this week. The Commission will then come forward with detailed proposals in early autumn."

Last week Chancellor Alastair Darling said the Government could endorse the plans - as long the supremacy of national authorities was preserved.

He said there had to be greater co-operation between European regulators to "plug the gaps" that had become apparent in the financial system in the last two years.

But he warned: "There is a principle here - that taxation is clearly a matter for member states. It is not a European Union matter."

The Chancellor backed greater co-operation between national supervisory bodies, and seized on a declaration from EU finance ministers that any new rules "will not impinge in any way on member states' fiscal responsibilities".