Efforts to clinch a deal on the way banks, insurers and markets in the European Union are supervised failed on Wednesday and talks will resume in late August or early September.
The talks on creating pan-European authorities to prevent any repetition of the financial crisis are deadlocked because of differences between EU governments and the European Parliament over how much power the new supervisors will have.
“We are getting closer to the finish line but there is still some way to go. A dynamic and balanced deal is now in reach,” EU Internal Market Commissioner Michel Barnier said in a statement to Reuters.
A European Parliament source said: “Talks have not led to an agreement this morning. Negotiations have now been postponed until the end of August, early September.”
Despite the delay, the parliament could still vote on the supervision package in September and the new institutions could still become operational next year as planned.
Some European diplomats had hoped a deal would be reached this week after EU finance ministers agreed on Tuesday to offer concessions to the parliament, which is pushing for a more centralized approach to supervising the financial sector.
But although differences were narrowed at talks on Wednesday, the parliament’s negotiators decided the offer was not sufficient.
“The feeling is that the Council (EU governments) still should move one or two steps in the direction of the parliament,” said an official from the executive European Commission, which is trying to broker a compromise.
At the heart of the dispute is how much power the three new supervisory bodies will have to intervene directly in any country that is not following financial rules properly.
The ministers agreed on Tuesday that the new authorities would be allowed to intervene directly under certain strict conditions, even though a group of countries led by Britain had opposed that. But EU finance ministers would first have to declare there was an emergency involving those banks.
In return, Britain was promised that one of the new institutions would be based in London, rather than Frankfurt, a proposal that the parliament seemed ready to accept.
Disagreement persisted over the scope of binding mediation by the new bodies in cases of disputes between national supervisors, the source said.
“The EU financial architecture will only be effective if it is ensured that the EU authorities have the right to binding mediation,” said Sven Giegold, a parliamentary negotiator from the Greens Alliance. “This is crucial in cases in which national authorities cannot agree on how to proceed in dealing with a cross-border financial institution.”
The bloc wants to show it can keep up with the United States in meeting pledges both sides have made on a global level to apply lessons from the financial crisis speedily.
U.S. President Barack Obama is expected to sign into law a broad regulatory reform this month that includes changes to supervision.
(Writing by Marcin Grajewski; Editing by Timothy Heritage)
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