European Union regulators will not be able to force governments to rescue a troubled bank using taxpayers' money, according to a compromise on financial supervision reached on Tuesday by the bloc's finance ministers, according to dpa. The deal, clinched after hours of discussions in Luxembourg, succeeded only after a compromise was reached in the face of fierce resistance from Britain, home to Europe's most important financial centre - the City of London. According to conclusions agreed by the 27 ministers, a future European supervisor will not, if there is a dispute between national supervisors, be able to "impinge on member states' fiscal responsibilities." Britain had threatened to scupper the European Commission's proposals for fear of surrendering too many powers to Brussels. "The issue that concerned us, and which we could not live with, was a proposal whereby ... they might have been able to say to a government: you've got to do something about your bank, therefore, you have to ask your taxpayers to contribute," British Chancellor Alistair Darling said. "The principle here is that taxation is a matter for member states, not a European matter," Darling said. Drawing on a report by former International Monetary Fund chief Jacques de Larosiere, the commission has proposed creating pan-European supervisors in the wake of the global financial crisis. Greater cooperation between national supervisors is seen as a necessary step to deal with banks and other financial institutions that operate in more than one EU member state. One obvious example is Fortis, a troubled bank operating in Belgium, Luxembourg and the Netherlands and which required a state bail-out from all three countries. The commissions' proposals envisage the creation of a European Systemic Risk Board (ESRB) - formally referred to as "council" - and a European System of Financial Supervisors (ESFS). The first would monitor and assess the overall risks to the stability of the bloc's financial system; the second would act at the microeconomic level, networking national supervisors in charge of the day-to-day supervision of cross-border financial institutions. The meeting in Luxembourg was designed to pave the way for a final decision by EU leaders at next week's summit in Brussels. But it left a number of issues unresolved. For instance, the commission wanted the ESRB to be chaired by the head of the European Central Bank (ECB). But because of objections from Britain and other member states that are not part of the eurozone, Tuesday's agreed text stated that the ESRB could also be chaired by an elected central banker or "a highly regarded independent person elected by the Council (of finance ministers)." Asked about the change, EU Monetary and Economic Affairs Commissioner Joaquin Almunia said he was "positive that the (European) Council will fully support the commission's (original) proposal." Czech Finance Minister Eduard Janota, whose country holds the rotating presidency of the EU until the end of June, also conceded that "three or four disputed points are still open" and will have to be resolved in the coming months. Darling rejected claims that he had watered down the original EU proposals, and diplomats noted that the issue that had been raised by the chancellor would only have applied in case of strong disagreements between two or more member states. Critics retorted that that was exactly the case with Fortis, one of Europe's most celebrated victims of the global financial crisis.
