THE EUROPEAN Commission has unveiled plans to create a new financial supervisory system to ensure there is no repeat of the global economic crisis.

The proposal would create a new European systemic risk board to assess threats to financial stability and a network of three EU supervisors to regulate pan-European financial institutions. The powerful new EU supervisors, covering banks, insurance companies and markets, would enjoy binding powers over national regulators in member states for the first time.

“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,” said European Commission president José Manuel Barroso, who suggested the new EU system could inspire a new global regulatory system.

He will highlight elements of the new EU system when he meets leaders of the 20 biggest economies at the G20 meeting in Pittsburgh later this week.

Internal Markets Commissioner Charlie McCreevy yesterday called on member states to adopt the measures as soon as possible to enable the new system to be in place by this time next year. But the detailed proposal could face opposition from Britain and Germany, which remain concerned that the new EU banking supervisor could overrule their own banking regulators.

British prime minister Gordon Brown insisted at an EU leaders’ meeting in June that no EU supervisor could overrule a national regulator over issues that would have a major fiscal impact on member states. In other words, any final decision to bail out financial institutions with taxpayers’ funds should remain with national rather than European regulatory authorities.

Mr McCreevy said this was an area “fraught with a lot of difficulties” and predicted a “heavy debate” when the measures are considered by the European Parliament and the Council of Ministers in the autumn. Both bodies must approve the proposed EU legislation before it can enter into law.

Paul Myners, Britain’s financial services minister, said yesterday that the new watchdogs should not be given more power than was foreseen in June, when Britain and other EU countries agreed to establish the new supervisors.

Simon Tilford, chief economist with the Centre for European Reform think tank, said Britain’s primary concern about the proposed EU system was the competitiveness of the City of London, Europe’s biggest financial centre. “We need to be sure that the new regulations, such as on supervision, are not motivated by a political desire to undermine the City’s position,” he said.

Economic and Monetary Affairs Commissioner Joaquin Almunia said the so-called European systemic risk board would spot risks that had previously been ignored, such as the rapid rise in borrowing in foreign currencies that happened in the run-up to the financial crisis. He said the new board would increase the credibility of warnings.