Press conference on Wed Feb 25, 2009, held by José Manuel Barroso, President of the EC and Jacques de Larosière, President of the High Level Expert Group on EU Financial Supervision

A European Union panel on Wednesday published recommendations for an overhaul of  the financial regulation system but the proposed structure has been criticised as unwieldy.

The panel, headed by Jacques de Larosière , a former French central banker, proposes the creation of a new regional supervisory council responsible for monitoring broader systemic risks, and for a gradual harmonisation of regulatory rules within the EU. The panel recommends leaving the day-to-day regulation of banks and other financial institutions to national regulators.

The regional supervisor, to be called the European Systemic Risk Council, would be led by the president of the European Central Bank and include central bankers from across Europe and some national regulators.

The council "would be an unwieldy body looking more like a small parliament than a decision-making body," said Daniel Gros, director of the Centre for European Policy Studies in Brussels. The Association of British Insurers, welcomed the recommendations, saying they would improve the current fragmented system.

A summit of the Group of 20 industrial and developing countries will meet in London in early April, to focus on remaking the global financial architecture.

The report opposes calls to give the European Central Bank the power to oversee the Eurozone's banks, as such a role, which would involve dealing with officials from national governments and choosing which banks to bail out in a crisis, which would threaten the ECB's political independence.

The report sets out a structure for a second layer of Europe-wide regulation, with three separate authorities to oversee the EU's banks, insurers and securities markets. These authorities would act as mediators among national supervisors, and license regional institutions such as credit-rating companies.

José Manuel Durão Barroso, President of the European Commission said at the launch of the report: "Let me be very clear: the report confirms my firm belief that a European system of Financial Supervision is indispensable. I am committed to engage immediately in its preparation. And this report provides a very good basis on which to build our proposals.

In advance of broader proposals on supervision later in the year, the Commission intends to present detailed concrete proposals during April on private equity, hedge funds and immediately after that on remuneration schemes.

Let me say a word on remuneration schemes which are also covered by the De Larosière report. This is an area where decisive action is needed also at European level: it is a matter of fundamental ethics to avoid that losses are socialised and gains are privatised.

The crisis has shown why we must deepen our supervisory cooperation at EU level. Why we must have better crisis management systems. Why we must be able to have a basic core set of high level rules – both regulatory and supervisory – that are rigorously applied to all firms, by top class supervisors. Why we must avoid what Jacques de Larosière calls "chacun pour soi" solutions – everyman for himself – with no concern whatsoever about the neighbours. That is not good enough. It never was. And now it is totally unacceptable."