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EU to seek rapid progress on financial regulation

European Union leaders will call at a summit next week for rapid progress on agreeing and implementing new financial regulations to prevent another global economic crisis, a draft summit declaration showed.

The draft, prepared for the June 18-19 EU summit or Council in Brussels, showed the EU leaders would approve the creation of two new bodies to assess potential threats to financial instability and protect small financial firms and consumers.

The banking sector remains under stress and credit flows are still constrained, so governments should be alert to any need for further measures to stem the crisis, said the draft, obtained by Reuters.

“The European Council calls for rapid progress to be made in the field of regulation of (the) financial market, notably on the regulation on alternative investment funds and on improved capital requirements for banks,” said the draft conclusions.

“...The banking sector remains under stress and credit flows continue to be constrained. Governments must therefore stay alert to possible further measures which may be needed. Any further actions must be consistent with single market principles and take into account a credible exit strategy.”

The EU wants to show it is acting quickly to stem the crisis following a European Parliament election in which a number of governing parties suffered defeat over their handling of the economy.

The draft said the leaders of the 27 member states would agree to proposals to create a European Systemic Risk Board to monitor and assess potential threats to financial stability and, where necessary, issue recommendations for action.

They will also recommend that a European System of Financial Supervisors be established to safeguard financial soundness at the level of individual financial firms and protect consumers of financial services.

The statement said the leaders wanted the new regulatory framework in place in 2010 and would urge “all parties to accelerate their efforts to support the recovery” before a summit of G20 leading and emerging economies in September.

The leaders will also underline the need to fight unemployment, which has soared during the financial crisis, but say measures must be “coordinated, self-supporting and in line with single market rules.”

“The European Union and its member states must assert their will to put people at the center of their recovery plans,” the draft conclusions said. (Reuters)