European Commission and Parliament officials were optimistic ahead of a 2 September three-way meeting that a deal could finally be sealed on the six-text financial supervision package, published a year ago this month. Negotiations reopened on 31 August to iron out the remaining difficulties - principally, how much power should be handed over to three new EU-level watchdogs - so that MEPs can vote in plenary on the package, on 22 September.

The Commission is now “much happier” with the compromise on the table, said one official, after MEPs backed down and agreed that the three agencies should be located in three separate cities rather than centralised in Frankfurt, Germany, as well as giving some ground on the agencies’ power to address decisions to individual banks. EU finance ministers, in July (see Europolitics4019), had already softened their stance on what direct powers the bodies should have, agreeing to allow them a measure of control in emergency situations, where EU law has been breached and where there is a dispute between national regulators.

The supervision package (COM(2009)499-503) was tabled in September last year and suggests the creation of a macroeconomic risk board (ESRB) and three sector-specific EU authorities with binding powers for the banking, insurance and securities markets (the ESAs). The powers of the agencies have been disputed by member states keen to retain control at national level, while MEPs want the bodies to be able to make pan-European decisions.

If a deal is not reached on 2 September, say officials, it will have to be inked this month if the three watchdogs are to be up and running by a January 2011 deadline. A September plenary vote will be followed by a Council endorsement (which can be done at any formal Council).