EU calls for worldwide banking watchdog

European Union leaders are set to call today for the creation of international boards to oversee at least the world's 30 biggest banks and financial institutions.

The latest effort to step up regulation to address the global financial crisis is based on a proposal by Prime Minister Gordon Brown.

The supervisory body would consist of regulatory officials from big countries and financial centres. The goal would be to enhance communication and response plans for bank operations worldwide.

The plan would require backing from the US and China, which could prove potential hurdles.

European leaders backed the idea of a supervisory body at yesterday's summit, which came days after the EU's biggest economies agreed on a co-ordinated €2 trillion (£1.5 trillion) plan to prop up their biggest banks by buying equity stakes and guaranteeing debt.

That move, which echoed a call by the Group of Seven leading nations, was rapidly followed by the US. All 27 EU members voted yesterday to approve the bailout plan.

There could be opposition within the EU about the fine print of any agreement. The UK is unlikely to agree with calls from France's President Nicolas Sarkozy,for financial supervision to be extended to hedge funds, or to eliminate offshore financial centres such as the Channel Islands and the Isle of Man.