European Union finance ministers said Tuesday they were nearing a deal with the European Parliament on financial supervision, as they backed compromise proposals suggested by the Belgian presidency of the EU as the basis for a final agreement, DPA reported.
At stake is the creation of three European Supervisory Authorities (ESAs) overlooking banking, markets and insurance, as well as a European Systemic Risk Board (ESRB) attached to the European Central Bank (ECB), tasked with monitoring risk across the financial system.
"There is now a large degree of convergence between the two institutions, thanks to negotiations which have already taken place," EU ministers said in a statement released on the margin of regular monthly talks in Brussels.
The financial supervision package, aimed at preventing a repetition of the 2008 financial crash, is meant to be in place by January 1, 2011, which would require the parliament to vote on it before the end of September.
Meeting the deadline is important because other measures in the pipeline, such as a proposal to place credit rating agencies under EU oversight, depend on the ESRB and the ESAs being already in place.
Ministers said they "agreed on a political approach on the compromise proposals presented by the (EU) presidency, with a view to facilitating continuing negotiations" with parliament.
The EU assembly, which has equal say on the supervision package, had held off from voting on the issue last week, in the hope of persuading EU governments to back a stricter version of the reforms.
The two sides are arguing over how much power the new authorities should have over the existing network of national supervisors, with deputies calling for them to be able to override national decisions and give direct orders to financial institutions.
Britain is leading the opposing camp, insisting for example that no EU authority should be able to order it to shell out money to rescue financial institutions.
Chancellor George Osborne said the position agreed by EU ministers complied with British "key requirements."
"We have made considerable progress ... the fiscal sovereignty of member states is fully respected," Osborne said.
Britain insisted that proposed EU market regulators would not "become involved in day-to-day supervision" of national financial supervisors or firms, stepping in only "where there is a dispute about a point of law," Osborne added.
Belgium's proposals are confidential, but according to a draft seen by the German Press Agency dpa, they suggest that any EU state could appeal a decision by an ESA if it thinks it would carry a financial cost.
A national appeal could be overruled if other member states decided it by a simple majority vote, the text added.
But in a further sop to Britain, the EU presidency conceded that the future European Banking Authority (EBA) would be based in London rather than Frankfurt, where parliament wanted all new authorities to be established, alongside the ECB.
"From a (British) perspective, I think it is significant that attempts to move the banking authority to Frankfurt ... have been resisted," Osborne said.
According to EU ministers, Paris should host the European Securities and Market Authority (ESMA), leaving Frankfurt with the European Insurance and Occupational Pensions Authority (EIOPA) and the ESRB.
Officials said a new round of talks involving the EU presidency, EU assembly representatives and the European Commission is due to take place on Wednesday.
Swedish Finance Minister Anders Borg was cautiously optimistic.
"We need to have these agencies up and running by January 1, and now I think the prerequisites for that are basically in place, but obviously negotiations will always be complicated and nothing is finished until everything is finished," he said.
The EU is also under pressure to act fast as the US is expected to approve its own financial supervision reforms later this month.