One of the aims of the London Summit is to improve the transparency of financial markets and strengthen cross-border cooperation in financial regulation. Several bodies have published proposals to tackle these issues, with the latest being a group of senior European regulators chaired by Jacques de Larosière, a former managing director of the International Monetary Fund. Their report appears in a week when European Union member states have been discussing common approaches ahead of the summit, and provides detailed proposals for stronger cross-border regulation.

Previous attempts to overhaul EU financial regulation have exposed divisions between countries in favour of a single European regulator and those opposed to the idea. The Report of the High-Level Group on Financial Supervision in the EU has stopped short of recommending a single European financial services supervisor, but has set out 31 recommendations for closer co-ordination between national regulatory bodies and some EU-wide regulatory standards.

The report proposes a new European Systemic Risk Council to collect information and analyse it to detect sources of systemic risk and financial instability. It would bring together representatives from the central banks and financial regulators of all the EU’s 27 member states, under the chairmanship of the European Central Bank.

The report also recommends creating a new European System of Financial Supervision to ensure financial stability in the EU and its member states, working closely with national regulators. As part of this, the three existing pan-European committees of banking, insurance and securities regulators would be replaced by three new authorities run by full-time independent professionals. They would coordinate the application of common supervisory standards, ensure strong co-operation with the other supervisors and make it easier for regulators to supervise institutions based in other countries.

On EU-wide issues, the report calls for the regulation of credit rating agencies by the new authority responsible for securities supervision. It also wants measures to inhibit the emergence of 'parallel banking systems', which hid from regulators the extent of risk-taking in the international financial system. And it says that remuneration in financial services should ensure that only performance over the long-term is rewarded.

More generally, the report says the Basel II banking rules need to be overhauled to gradually increase the amount of capital banks must hold, reduce the tendency of the rules to make downturns worse and introduce stricter rules for off-balance sheet items.

The report was commissioned in November by José-Manuel Barroso, President of the European Commission, and will be on the agenda of the EU summit in March.

Its proposals were welcomed by the Financial Times, which said they were 'ambitious, hard-nosed and politically plausible'. It praised the report for not suggesting a single European regulator but said it was an invitation to European leaders who said they wanted better financial regulation to 'raise their collective game'.