European Union (EU) leaders will endorse a plan to introduce a new system of pan-European financial supervision to prevent recurrence of the current crisis, according to a draft conclusion to be adopted Friday.
The EU summit "recommends that a European system of financial supervisors, comprising three new European Supervisory Authorities, be established," the draft said.
Diplomatic sources said a compromise was reached after Germany and France made concessions to Britain, which had been reluctant to hand over too much control over its financial sector to the EU.
The hard-fought reform plan involves the creation of four European watchdogs to strengthen EU-wide financial supervision at both micro- and macro- level.
On the micro level, three new European authorities would be responsible to supervise banks, insurers and stock markets respectively.
London had been concerned about the fact that the three new European authorities would have a final say in disputes between national regulators, alleging member states may be at risk of being ordered to carry out costly bailouts of major banks in time of crisis so as to prevent spill-over effects in others.
EU leaders agreed that the new authorities "should have binding and proportionate decision-making powers in respect of whether (national) supervisors are meeting their requirements under a single rule book", but they assured Britain that any decisions taken by the new bodies "should not impinge in any way on the fiscal responsibilities of member states."
Britain had also been opposed to the proposal that the new European Systemic Risk Board (ESRB), composed of central bankers and national regulators to monitor and assess risks to the stability of the financial system as a whole, should be chaired by the governor of the European Central Bank (ECB), the central bank for the euro zone of which Britain is not a member.
The compromise said that the chair of the ESRB should be elected by the members of the ECB's General Council, which is made up of the governors of the central banks of all 27 EU member states.