(Reuters) - A European Union blueprint to shake up the policing of banks has split opinion among the bloc’s bigger countries.
The 27-country EU wants to set up pan-European watchdogs to keep tabs on banks, insurers and trading exchanges as well as a group to watch out for bigger risks to the economy.
On Wednesday, EU finance ministers will try to reach agreement on how much power to give the new authorities. If they fail, leaders will continue the talks at a summit next week.
Here is a rough guide:
* The bloc’s member states have been in talks since late September on how to reshape a law drafted by the European Commission, the EU’s executive body. Sweden, holder of the EU presidency, has been chairing the negotiations.
* While France favours giving the new authorities wide-ranging powers, Germany and Britain fear this could create super-regulators that would overrule governments and tell lenders and others directly what to do.
* Britain, home to Europe’s financial capital, London, has mounted the stiffest opposition to the rules. It wants to water down proposed powers, leaving the new watchdogs mainly to draft and police pan-European standards for regulation.
* The European Parliament has an equal say in finalising the law. Its position will be thrashed out by political parties’ representatives on its Economic and Monetary Affairs Committee.
* If parliament and the EU states agree, the new watchdogs could be up and running by the end of 2010.
* Under the plan, a European Systemic Risk Board will sound its sirens if it sees threats to the financial system, like those that triggered the current crisis.
* It will be able to issue warnings, saying what should be done about risks in the financial system. It could recommend that a country take action, for example, and that country would be obliged to explain itself if it does not do so.
* But the board will have no binding legal power, relying rather on political pressure. Warnings could be made public.
* The body will effectively be an arm of the European Central Bank (ECB). Staff, including the head of its secretariat, will mostly come from the ECB.
* It will be run by a general board including the ECB president, governors of the region’s central banks, a member of the European Commission and chairpersons of the three European supervisory authorities.
* Its chair will be elected by the board members, who are also in the ECB’s Governing Council. Many observers believe this makes ECB President Jean-Claude Trichet, the most likely chairman.
* The chair will be the public face of the body and will be able to call extraordinary board meetings, at which he or she will have a casting vote.
* Separately, three new groups will watch banks, insurers and exchanges.
* They will set the bar for supervision standards and set uniform rules around Europe -- their rulebook will become European law.
* They will be able to tell national supervisors, such as the Financial Services Authority (FSA), what they should be doing.
* If the European Banking Authority, for example, believed the FSA was not meeting EU standards for supervision, it could recommend that action be taken within a month.
* If the situation persisted, the Commission may demand the national watchdog “take specific action.” That supervisor must oblige or say within 10 days when it intends to do so.
* A lack of coordination among national supervisors has been blamed, in part, for the financial crisis. In future emergencies, the European Banking Authority will be able to tell a group of country supervisors to take joint action.
* If a national watchdog challenges such a recommendation, the Banking Authority can ultimately overrule it but only in cases where it is found in breach of EU law by the Commission.
* The Systemic Risk Board will be able to ask super-watchdogs or country supervisors for such information as the exposure of a troubled bank a risky region.
* There is an obligation on the new authorities and European countries to hand over information to the risk board, which can drill down as far as specific companies.
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