PREVIEW-European regulatory ardour faces cold shower at G20

By Mark John and Rachelle Younglai

BRUSSELS/WASHINGTON, Nov 13 (Reuters) - Europe's drive for an early and far-reaching revamp of global financial regulation, drawing on lessons from the credit crisis, faces at best a lukewarm reception at this weekend's summit of top economies.

The lack of preparation time, a still widespread reluctance to delve into areas such as bank confidentiality and the absence of U.S. President-elect Barack Obama mean the leaders of the G20 developed and emerging economies cannot realistically produce quick reforms at their Washington talks.

They may merely charge an expert group to look at how banks, global insurers and complex derivatives instruments are regulated and make recommendations at a later date, industry experts suggest.

"They will all recognise that it is infeasible to have a technically sound set of recommendations on financial regulation in a 5-hour meeting," said William Cline of the Peterson Institute for International Economics in Washington DC.

"Most likely, they will agree to set up a process to review a whole range of regulatory practices," said Cline. Options include entrusting such study to the Financial Stability Forum, a panel of rich-nation central bankers and regulators.

With Obama not taking office till Jan. 20, outgoing U.S. President George W. Bush will host leaders from countries including Britain, China, Brazil, India, Germany and Canada.

Washington will urge them to reaffirm a commitment to open markets and trade liberalisation. The Bush administration, which is overseeing a $700 billion government bailout plan for American financial institutions, also hopes leaders can identify measures to calm financial markets.

But U.S. officials have been vaguer on the prospect of reforming an international regulatory order which was caught napping as a U.S. mortgage meltdown triggered a global credit crisis and wiped out trillions of dollars in investments.

"FOUNDING EVENT"?

The tone in Europe is markedly more ardent.

In a declaration last week, European leaders including France's President Sarkozy and Britain's Gordon Brown said the talks should be "the founding event" of a financial reform comparable to the 1944 Bretton Woods conference from which sprang the World Bank and International Monetary Fund.

"No financial institution, no market segment, no jurisdiction should escape appropriate and proportionate regulation or at least surveillance," they said.

They called for decisions within 100 days of the summit on five areas ranging from surveillance of the credit rating agencies blamed for overlooking warning signals to a code of conduct on risk-taking in the finance sector.

Already on Wednesday the European Commission proposed a legally-binding register and surveillance system for credit rating agencies in the bloc and urged other jurisdictions to follow its plan, which could be implemented within a year.