EU reaches deal on financial supervision to prevent crisis

EU states, the European Commission and European lawmakers reached a deal in principle to establish three agencies that will oversee banks, insurers and the markets, said European Internal Market Commissioner Michel Barnier.

The agreement also creates a European Systemic Risk Board which would look out for threats to the region's economy.

“We have reached a crucial milestone,” Barnier said. “We have reached a political consensus on the creation of a European financial supervisory framework.”

The deal must be approved by EU finance ministers meeting in Brussels on Tuesday and the European parliament sometime this month. The EU hopes to launch the new agencies in January.

Europe is lagging behind the United States in efforts to regulate the financial sector as U.S. President Barack Obama signed into law in July the most sweeping reform of Wall Street since the 1930s.

Negotiations between EU states and lawmakers resumed this week after they had stalled in July as the two sides locked horns over how much power to give to the new agencies.

European states reached their own compromise in late 2009 despite reluctance from Britain to grant to much authority to the new agencies.

“The fact is that we did not see the crisis coming. We did not have the monitoring tools to detect the risk which was accumulating across the system. And when the crisis hit, we did not have effective tools to act,” Barnier said.

The new bodies will give Europe “the control tower and the radar screens needed to identify risks, the tools to better control financial players and the means to act quickly, in a coordinated way, in a timely fashion,” he said.

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