BRUSSELS — The European Commission was to forge ahead on Wednesday with detailed proposals for tough financial supervision amid horse-trading over a pivotal role for the Bank of England's governor.
The EU announcement, on the eve of a summit of the Group of 20 leading world economies in Pittsburgh, Pennsylvania, will also include plans for new pan-European super watchdogs to oversee banks, insurers and securities firms.
The emergence of the BoE's Mervyn King as the leading contender to be the deputy head of a new European Systemic Risk Board, expected to be chaired by the president of the European Central Bank, Jean-Claude Trichet, is aimed at overcoming misgivings emanating from the City of London.
The new bodies will be responsible for identifying threats to the EU economy as a whole and will have the power to demand national action or impose mediation on national supervisors in the event of disagreement.
The aim is to avoid a repeat of last year's financial crisis which saw over-leveraged banks go under or require massive state bailouts.
But it is this overarching power that has Britain and some other EU nations worried about the proposals, agreed at a European Union summit in June but which must be backed by member states and the EU parliament if they are to come into force.
"The devil is in the detail," one European source said.
Backing from Britain -- Europe's biggest financial centre -- is vital if the new structures are to be up and running as planned by the end of next year.
Under the commission proposals, the European banking authorities should have "the power to require national supervisory authorities to take specific action" to remedy emergency situations, according to a draft text.
The commission itself would have powers to decree an emergency situation.
"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," Commission President Jose Manuel Barroso said in a statement.
"This European system can also inspire a global one and we will argue for that in Pittsburgh."
London is concerned about ceding to Brussels binding powers that leave British taxpayers picking up the tab.
"We think that it is important that responsibility for making those types of decisions rests with national supervisors," a British diplomat said.
Diplomats said Britain, which is not part of the 16-nation eurozone, could be brought on board if King was given real influence on the oversight body.
Britain thinks "there is a good case for putting forward the Bank of England governor as the vice chair," one EU diplomat said.
"There is an appreciation (in Brussels) of the fact that Britain is a large financial centre and its consideration might be above that of some other countries," the Financial Times reported on Wednesday.
Britain has also obtained an undertaking that centrally-decided measures "must not impinge on the fiscal responsibilities of (EU) member states."
The commission is therefore proposing a "safeguard clause" which would allow an EU nation to refuse to apply a decision which they opposed, after which a decision could be made by the EU nations in council.
Britain still wants this clause to be both clearer and broader.
It is not alone in having misgivings. France, Germany and others want the safeguard clause to apply only to the risk of state intervention in the case of a failing bank, one European source said.
"If we don't clarify this point it will remain too ambiguous and be subject to manipulation," the source said.
Some nations, France in particular, fear that the scheme will give the commission too much power and slow the reaction time for dealing with crises.
"This text could give the commission too much power and has little chance of being approved as it is," another diplomatic source said.
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