BRUSSELS - The European Union unveiled its blueprint on Wednesday for an overhaul of the way banks and financial markets are policed, a central plank to new rules designed to prevent a repeat of the global economic crisis.
It plans to create a banking super-watchdog, with power to overrule countries such as Britain, and a pan-European supervisor that would warn of early signs of crisis.
Our aim is to protect European taxpayers from a repeat of the dark days of autumn 2008, when governments had to pour billions of euros into the banks, European Commission President Jose Manuel Barroso said in a statement.
The European system can also inspire a global one and we will argue for that in Pittsburgh.
The laws, which also include the creation of a separate supervisor for insurers and markets, are set to give more say than ever to European institutions as Brussels tightens its grip on an industry blamed by many for triggering the economic slump.
The blueprint, which is the result of an agreement reached by EU leaders earlier this year, could erode the authority of Britain, which is fighting to keep control over the centrepiece of its economy, the City of London.
This package represents rapid and robust action by the Commission to remedy shortcomings in European financial supervision and will help prevent future financial crises, Charlie McCreevy, the EU's internal market commissioner, said.
Economic and Monetary Affairs Commissioner Joaquin Almunia said the new European Systemic Risk Board to warn of future crises and other watchdogs would solve weaknesses in the system that partly led to the financial crisis, which wrecked financial markets and froze lending.
The draft laws flesh out principles for reform agreed by EU leaders in June when Britain accepted new pan-EU supervisors for markets, banks and insurers that have binding powers over European member states.
The rules need the approval of the 27 EU national governments and the European Parliament to take effect.
Overhauling the way Europe's banks and financial services are policed is central to legislation Brussels has drafted to prevent a new financial crisis.
BREAKING THE MOULD
It is part of a broader range of laws ranging from the curbing of banker bonuses to forcing lenders to make greater financial provisions for hard times, and could break the mould of financial supervision in Europe.
But backing from Britain -- home to Europe's biggest financial centre, the City of London -- will be crucial to plans to set up the new structures by the end of next year.
Britain is nervous because the laws will give more say to European institutions.
The risk board, for example, which would be staffed by the European Central Bank and based in the Germany city of Frankfurt, is likely to have wide-ranging powers.
It will be able to issue warnings stating what should be done about risks in the financial system, although they would not be legally binding.
It could order a country to take action, for example, and that country would be obliged to explain itself if it did not do so.
Diplomatic sources said Bank of England Governor Mervyn King could be given a prominent role in European Union super-watchdogs being set up to monitor banks and market risks to win British backing for the plan.
(Editing by Timothy Heritage)