EUROPE - The European Union has reached an agreement on reforms in the financial sector with the creation of a European Systemic Risk Council and three new supervisors covering banking, insurance and securities markets.

The new watchdogs will oversee credit rating agencies and have some additional emergency powers to ban or restrict activities that threaten the stability of the EU's financial system.

Member states, rather than the European Parliament or Commission, will decide such emergencies.

Day-to-day supervision of individual companies will remain the responsibility of national regulators, but the new bodies will develop and enforce EU-wide harmonised rules.

The move, which comes on the back of Wall Street reforms approved by US president Barack Obama, must be approved by European finance ministers and the European Parliament.

Further discussions will take place next week, and proposals could be put to the European Parliament later this month.

The three watchdogs will be based in London, Paris and Frankfurt.

European internal market commissioner Michael Barnier said: "The new framework is a crucial stage in our effort to learn all the lessons from the crisis to better protect our economy and our citizens in the future."

Peter Skinner, MEP for the southeast and rapporteur for the European Insurance and Occupational Pensions Authority (EIOPA), said: "We needed something to co-ordinate the actions of national authorities, and EIOPA will do this.

"This gives us the template for action in the European insurance market across the board and is one of the pieces in the jigsaw for getting things done at European level.

"EIOPA will be based in Frankfurt and work on the implementation of Solvency II. It will be the body to enforce the laws created at a European level and is expected to be up and running by January 2011."