The draft rules come a year after the demise of US investment bank Lehman Brothers, a seismic event for markets worldwide. Within the 27-nation EU, the turmoil was compounded by the lack of a standardised approach to financial regulation.

This legislative package “shows our determination to learn from the crisis and take the necessary action,” said internal market commissioner Charlie McCreevy.

Most supervision is done at national level, with individual EU governments keeping an eye on their own banks - even though the single market has existed for more than a decade and many financial institutions do business across borders.

The legislation would set up a European System of Financial Supervisors to ensure consistent oversight of financial institutions that operate in two or more EU countries. Under the system, new European authorities on banking, insurance, securities and occupational pensions would oversee and coordinate the work of national supervisors.

These European Supervisory Authorities would have the final say in disagreements between national supervisors and could impose action in emergencies. In particular, the securities authority would have direct oversight of credit rating agencies - private companies that are supposed to warn investors about risky assets.

The rules would also create an EU-wide body to identify risks to the stability of the financial system as a whole. The new supervisory authorities would be represented on the European Systemic Risk Board, along with European and national central banks.

The EU has called for similar reforms at global level, a position embraced in April by the Group of 20 top economies. Now, six months later, G20 leaders are meeting in Pittsburgh to take stock of their progress and consider restricting bankers' pay - action supported by the EU.

After last year's meltdown, the EU commissioned a group of banking experts to find ways to prevent a repeat of the worst financial crisis since the Wall Street crash of 1929. The proposals are based on those recommendations, endorsed by EU leaders earlier this year.