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European Parliament - MEPs to pass sweeping bank controls - European Banking Authority will be based in London

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Sweeping European supervisory powers over banks and financial institutions in response to the economic crisis are set to be approved by Euro-MPs. A vote in Strasbourg marks the end of months of negotiations to create what Chancellor George Osborne has called a "new financial supervision architecture for the EU". The Chancellor backed the idea, insisting that UK fiscal sovereignty remains intact, with day to day control over banks and other financial institutions staying with the Financial Services Authority, the UK national monitoring authority. But the new accord, already approved by EU finance ministers and set to come into force at the start of next year, centres on the setting up of three new financial watchdogs, to tighten surveillance of the banking, securities and markets, and insurance sectors.

The banking watchdog, the European Banking Authority, will be based in London. The pan-European supervisory system is designed to establish close co-operation and co-ordination between national and European authorities to ensure the stability of the EU's financial system, and close gaps in between different national regimes. A new board made up of heads of European central banks will monitor and act against macro-economic risks as they emerge across Europe. Mr Osborne says the terms of the accord preserve the City of London's competitiveness as a financial centre. During the negotiations he successful fended off efforts to oblige the UK to give Brussels advanced sight of his domestic Budget plans - ahead of Parliament. Instead, as explicitly made clear in the agreement, the Chancellor will continue to announce the Budget to the Commons first. But Open Europe, campaigning for EU reforms, claimed earlier this month that the new supervisory controls amount to a clear shift in power from the UK, giving EU officials a mandate to "interpret, apply and even enforce EU laws at the expense of national regulators".

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