2 September 2010 Last updated at 17:52 ET

Europe agrees new agencies to supervise financial firms

EU leaders say the agreement gives them the tools to "better control financial players"

The European Union has reached agreement on reforms to financial supervision, officials have said.

EU states, the European Commission and MEPs agreed to create agencies that from next year are to oversee banks, insurers, and financial markets.

The deal must still be approved by European finance ministers and voted on by the European Parliament.

Europe's move follows the sweeping Wall Street reforms that President Barack Obama signed into law in July.

It is hoped the agreements in Europe and the US will help stop a repeat of the financial crisis in which loose supervision of companies was blamed for contributing to problems.

Michel Barnier, European Internal Market Commissioner, said after the deal was agreed late on Thursday: "We have reached a crucial milestone. We have reached a political consensus on the creation of a European financial supervisory framework."

The agreement also creates a European Systemic Risk Board with the task to look out for threats to Europe's economy from the financial sector.

Mr Barnier said the new agencies would 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".

If the agreement is ratified, the EU hopes to launch the new agencies in January.

Negotiations between EU states had stalled because of differences over how much power the agencies should have.

There had also been criticism from America that Europe was too slow in beefing-up supervision.

Compromise

Britain had fought to limit the power of the agencies, believing that they should not interfere with a state's sovereignty.

However, as details of the agreement began to emerge on Thursday, it appeared that a compromise had been reached on the issue.

Conservative economic and monetary affairs spokeswoman Vicky Ford, MEP, who took part in the negotiations, said: "The new structures will allow better coordination of financial services supervisors across Europe, thus protecting consumers from cross-border crises that we witnessed.

"At the same time national governments and national regulators keep their frontline responsibility to protect national tax payers' interests," she said.

She said EU states had reached a "pragmatic compromise" on "very complex multi-layered legislation".

A UK government spokesperson welcomed the deal, saying it was "a very good outcome for the UK, fully reflecting the priorities secured by" Chancellor of the Exchequer George Osborne.