Britain blocks financial supervision from Brussels: source

(BRUSSELS) - British Prime Minister Gordon Brown has made it a personal priority to rein in European Union proposals to regulate financial services from Brussels, a source said Thursday.

"Britain's concerns on this area remain -- it's obviously going to go to the top political level, which reflects how important the issue is," said the source, days from talks between finance ministers on the sector's supervision.

Plans for new cross-border EU bodies to police banks, insurers and markets have become the bane of the bloc's current Swedish presidency, which passes the baton to Spain at the end of December and desperately wants to conclude a deal.

Britain is adamant that the three new bodies should not have "direct supervisory authority over firms," and that "decisions should be taken at a national level," with adjudication the job of member states -- and not the European Commission.

The system, first agreed in principle in the summer, was proposed in detail in September by the commission, but EU finance ministers meeting in Brussels next week are already preparing to pass the buck to a summit of leaders on December 10 and 11.

The Swedes fear key EU member states have "not drawn the right lessons from the economic crisis," according to their finance minister, Anders Borg, who has warned that failure to reach a deal would be "very problematic for Europe."

Britain in October blocked reform proposals that it said impinged on its fiscal sovereignty and obtained scope for the London parliament to revisit the issue following "further political negotiation."

The British Treasury has said it wants to preserve the City of London's status as the most powerful financial centre in Europe.

Plans to tighten controls on the financial sector were originally based on a report by French former International Monetary Fund chief Jacques de Larosiere.

Despite Europe having emerged from the deep recession triggered by the financial crisis -- with the notable exception of Britain -- German Green lawmaker Sven Giegold said the need was still every bit as great.

"The proposal downgrades supervisory authorities from watchdog to spectator in times of crisis," said the EU parliamentary rapporteur for the sector, citing backing also from Germany and Spain.