EXTENSIVE NEW EU supervisory powers over banks and financial institutions have been accepted by an overwhelming majority of members of the European Parliament.

The agreement in the wake of the global financial crisis establishes three new financial watchdogs or European supervisory authorities to improve supervision and regulation of banking, markets and securities, and pensions and insurance.

A new systemic risk board has also been agreed, which will warn against the build-up of economic risk. The institutions come into being in January 2011 but decisions about their budgets and staffing have yet to be made.

Negotiations lasted a year and will result in powers to sanction national authorities and impose temporary bans on risky financial products and activities.

Didier Reynders, Belgian president of the council of finance ministers described the reforms as an “historic watershed achievement”. There would be a “college of supervisors. But there will be national supervision first.” Europe was “continuing to build up a unique supervisory model” and “we have to show that Europe of the 27 is capable of reforming its financial structures.”

Commissioner for the Internal Market Michel Barnier stressed that “these new authorities are not a substitute to national supervision” but a support. He told MEPs “we have mobilised 17 per cent of the GDP in Europe to save the financial system. Banks should pay for banks. Taxpayers should not have to do that.” Mr Barnier added: “You have to realise that half the businesses and banks in Europe belong to other countries and there is a whole transnational element” with ensuing risks.

British Labour MEP Peter Skinner, (Socialists and Democrats) one of five MEPs who negotiated for the 736 parliamentarians, said the financial crisis had given life to these “much needed” new agencies.

Speaking about Ireland’s situation and the capitalisation of Anglo Irish Bank in advance of the debate, he said it would still be an issue when the new institutions were up and running in January.

The Irish Government first has to establish the size of its problem. “They are making decisions slightly outside of the mainframe of all the other decisions being made about rescuing banks.”

He said “other finance ministers will want to know about the reasoning behind a large amount of funds being put in just to keep a bank afloat”.

Spanish MEP Ramon Tremosa i Balcells (Alliance of Liberals and Democrats) who co-ordinated the parliament’s position on the new systemic risk board, said the president of the European Central Bank would become president of the board and his reputation would thus be linked to financial stability in Europe.

Referring to former chairman of the US Federal Reserve, he said “if you look at Alan Greenspan, before the financial crisis he was God walking on earth. After the financial crisis everybody is asking him ‘where were you when the sub-prime crisis was generating.”

Irish MEPs welcomed the vote and Pat “the Cope” Gallagher (FF, Ireland North-West) said there would be a “more joined-up approach to the supervision of the financial services sector”.

Alan Kelly (Labour, Ireland South) said that if this financial supervision package was implemented properly “it will reduce risk and maintain stability in the EU banking system and prevent future financial nightmares like Anglo”.

Fewer than 30 MEPS voted against the new agencies, among them Godfrey Bloom (UK, Europe of Freedom and Democracy) who said the new institutions would have the same outcome as all other EU projects, which were “an astonishing litany of failure”.