U.K. Chancellor of the Exchequer Alistair Darling's push to limit the powers of new European financial supervisors was rebuffed Wednesday by the region's finance ministers.

Under the terms of an agreement in Brussels Wednesday, a government can only oppose an order from regulators if it gathers a blocking majority among the 27 European Union states. Darling arrived in Brussels a day earlier saying the burden should be on the regulators to seek a supporting majority from EU members before making an order.

"The U.K. had some major difficulties in accepting that the new European bodies would be able to take decisions" that would affect its companies, Luxembourg Finance Minister Luc Frieden told reporters in Brussels. "It was more of an issue between the U.K. and certain other EU countries."

The EU is aiming to revamp banking supervision a year after the bankruptcy of Lehman Brothers Holdings Inc. exacerbated a financial crisis that forced European governments to spend, lend or guarantee more than $5 trillion to support banks. An economic risk watchdog led by central bankers as well as new EU agencies to oversee banks, insurers and investment firms are intended to prevent a repeat of the worst global crisis since the Great Depression.

The clash in Brussels came amid U.K. concern that the appointment last week of Michel Barnier, an ally of French President Nicolas Sarkozy, as EU commissioner for internal markets will see London face a tougher regulatory environment during his five-year term.

Ahead of the meeting Wednesday, Darling wrote in The Times calling for less power for the Europe-wide watchdogs and said that the success of businesses in London was in the interests of Europe. "London, whether others like it or not, is New York's only rival as a truly global financial center," Darling wrote.

"We've found a compromise. We're in the process of creating a real European authority," French Finance Minister Christine Lagarde told reporters. "It was a laborious process; not everyone was on same wavelength."

Under the deal, countries can overturn European supervisors' decisions by garnering a simple majority among the 27 EU members, Lagarde said.

France had wanted members to need a qualified majority to overturn a decision, while the U.K. tried to restrict the supervisors' control, calling for the burden to be on them to seek a majority before forcing a country to use public funds for a bailout.

Darling said he was satisfied that Britain's fiscal independence was fully protected and that the EU voting would only kick in as part of an appeals process.

"In reaching agreement, countries have to show a bit of give and take," Darling told reporters. "The thing we weren't going to negotiate is that the agencies themselves can't impinge on our fiscal responsibilities."

Darling said the regional supervisors could serve U.K. interests, pointing to last year's bankruptcy of Icelandic banks that resulted in lost deposits for U.K. residents. Iceland is not an EU member.

The new regulatory system, including a European Systemic Risk Board of central bankers and national regulators, would ensure EU market laws are implemented the same in every country and strengthen supervision across the 27-nation bloc. The board is designed to issue warnings and recommendations, flagging problems such as the buildup of investments in U.S. subprime mortgages. Three new European supervisory authorities would oversee banking, securities and insurance and pensions.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.