UK urged to veto EU bank plan

By Huw Jones

LONDON (Reuters) - A sweeping European Union reform of financial supervision could turn into a muddle which Britain should veto unless there are tougher national safeguards, a parliamentary report said on Monday.

A draft EU law proposes to set up a new European Systemic Risk Board (ESRB) next year to warn about hotspots like asset bubbles and recommend action before they destabilise markets.

Three new pan-EU supervisory authorities for banks, insurers and securities markets would police a single EU rulebook and have powers to make binding decisions on member states.

EU states and the European Parliament have the final say and the bloc's leaders want a political deal among member states on December 2, less than three months after the draft was published.

"We consider that is too fast: the proposals will set in place a framework which should last for many decades, and there should be proper time for consideration, otherwise, this could end up as a recipe for a muddle," Treasury Committee Chairman John McFall said.

The committee's report backs the reform in principle to promote financial stability and plug regulatory gaps highlighted by the credit crunch. It also does not want undue delay to avoid banks thinking they can return to "business and usual."

But the committee of lawmakers from Europe's biggest financial and banking centre say in their report the speed of reform is overambitious and some details pose serious problems.

The main recommendations include: