BRUSSELS - World powers pushed for sweeping financial reforms to prevent another crisis Thursday, with EU leaders set to join Washington in calling for tough new controls despite British reservations.
A day after US President Barack Obama's administration unveiled a shake-up of US financial regulation, EU leaders are to approve steps to set up three new pan-European authorities to oversee banks, insurers and securities firms.
While existing national regulators would continue to oversee their financial sectors, the new authorities would coordinate across borders and potentially tell a national watchdog what to do if it falls out of line with EU rules.
London, one of the biggest financial markets in the world, fears however that the new authorities would be able to order governments to carry out costly bailouts of financial groups with taxpayer cash.
"We have to ensure strong, effective regulators at a national level -- and retain the vital link between home regulators and national government," British finance minister Alistair Darling said Wednesday in London.
Britain is not alone in its reservations on yielding regulatory powers to EU authorities with Slovenia, Slovakia and Romania also uneasy, diplomats said.
In light of such concerns, the leaders are likely to leave open the question of whether the new authorities will be able to overrule national financial sector regulators until more precise plans can be made in early autumn.
Britain, which is not part of the 16-nation eurozone, also has qualms about plans for a new "European Systemic Risk Board," to be chaired by the president of the European Central Bank.
However, diplomats have spoken of the possibility of allowing a non-eurozone central bank governor to chair the watchdog, which would be responsible for monitoring potential risks to stability and recommending further action.
European Commission chief Jose Manuel Barroso acknowledged earlier this week that there was "huge resistance" to the proposals, but insisted that "we have made a lot of progress" towards a reform.
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While proposals to consolidate financial sector regulation in EU bodies have been around for years, governments only started taking them seriously after the crisis last autumn exposed the limits of overseeing big cross-border banks with multiple national regulators.
The EU move comes after Obama proposed on Wednesday what was billed as the most sweeping regulatory overhaul since the 1930s, aiming to stop future meltdowns and purge the finance system of lax oversight, greed and huge debts.
In particular, the US proposals would give the Federal Reserve expanded powers to oversee regulation on all finance firms or banks that pose a significant systemic risk to the wider financial infrastructure.
US Treasury Secretary Timothy Geithner was to testify before the Senate Banking Committee on Thursday to back up the reform drive.
The plans, which still have to be approved by Congress, will inject the US government ever deeper into the financial sector.
As EU leaders focus at the summit on reforming financial sector supervision, concerns are also growing that more needs to be done to tackle massive losses still lurking on the balance sheets of European banks but not yet recognised.
The European Central Bank warned on Monday that eurozone banks might have to take another 283 billion dollars (204 billion euros) in writedowns by the end of 2010, mainly to cover risky loans.
Credit rating agency Standard and Poor's warned on Tuesday that more than half of Europe's biggest banks face the prospect of a downgrade as they struggle to shoulder mounting credit losses.
Meanwhile, Switzerland's central bank on Thursday warned the country's biggest banks were still heavily exposed to risky investments, urging them to bolster their capital base, reduce risk and cut costs.