Luxembourg  – European Union finance ministers were Tuesday debating controversial plans by Brussels for common supervision of the bloc’s financial system amid opposition from Britain and central European countries with a high concentration of foreign-owned banks.

“The proposals put forward by the (European) Commission are extremely important,” said EU Commissioner for Economic and Monetary Affairs Joaquin Almunia ahead of the meeting in Luxembourg.

“I very much expect a high degree of consensus” to emerge from Tuesday’s talks, said Almunia.

In presenting the proposals, the commissioner had expressed concern about the fact that despite the international nature of the financial crisis, many member states were reluctant to transfer the competences of their national supervisors to an EU body.

Based on a recent report by former International Monetary Fund chief Jacques de Larosiere, the proposal envisages the creation of a European Systemic Risk Council and a European System of Financial Supervisors.

The first, to be chaired by the head of the European Central Bank (ECB), would monitor and assess the overall risks to the stability of the bloc’s financial system, provide early warnings and recommendations, if necessary.

The second would act at the microeconomic level, through a network of national supervisors tasked with the day-to-day supervision of individual banks and other financial institutions that operate in several EU member states.

Eager to avoid future credit crunches, the commission wants to see this new supervisory architecture in place by 2010.

But Britain has emerged as one of the most vocal opponent of the commission’s plans over concerns that it might undermine the independence of City of London, the EU’s most important financial centre.

Britain, which has not adopted the euro, is also unhappy with the idea that the systemic risk council should be chaired by the governor of the ECB, who is chosen only by eurozone members.

But the plans have also encountered resistance from Slovenia, Slovakia and other Central and Eastern European countries where many Western banks operate.

Since disagreements between different national supervisors would be mediated by the European body, these governments fear that any proposed solution might work against them.

While ministers may agree to provide a broad endorsement to the commission’s plans during Tuesday’s meeting, diplomats said more work was needed, with a final decision in the hands of EU leaders meeting in Brussels next week.

“The (commission’s) plans are ambitious enough,” said German Finance Minister Peer Steinbrueck ahead of Tuesday’s talks.

But on micro-prudential supervision, “there are some obvious questions” concerning the cooperation and competences of national and EU supervisors, Steinbrueck said.  (dpa)