• Michel Barnier said the aim was a framework to tackle shared problems. Picture: AFP/Getty Images
But Michel Barnier told British MPs there was no plan for the new European Single Market Authority (ESMA) and related EU banking and insurance watchdogs to supplant local regulators - such as the Financial Services Authority - when they come into effect early next year.
Barnier told the Treasury select committee that the EU's planned changes would not harm the City of London, "the biggest financial centre in Europe", but make it stronger in the long term.
However, the European Commissioner for internal markets and services cited the "chaotic" example of Germany and other countries adopting different measures at different times against short-selling in financial markets. The aim of the EU changes, Barnier said, was to get national regulators to work together and learn the lessons of the financial crisis.
He said the "spirit" of the EU regulatory tier from next January was to "avoid situations where European decisions have to be imposed on national regulators".
But, during a grilling by MPs, Barnier admitted that in certain emergency situations ESMA will have sweeping powers, for example to control derivatives trading.
He said: "It's not more centralised regulation. It's a common framework for tackling shared problems." National regulators were vital, he added, because they were "closest to the ground" of moving events.
But he added: "You cannot have national solutions to deal with a global crisis."
Conservative MP David Ruffley criticised what he said was a worrying "lack of specificity" about when the EU could overrule a national financial regulator, saying the "open-ended powers to intervene at national level are deeply disturbing".
Barnier responded that co-operation between national financial regulators was the aim of the EU initiatives, rather than attempting to usurp national sovereignty. However, asked to specify other examples of where the new regulators might have the final say he said: "I have not got a list to give you."
The commissioner also defended the EU's curbs on bank bonuses and said he did not believe they would cause a flight of talent as has been feared.
"I would not be overly impressed by the blackmail exerted in which this kind of risk is mentioned," Barnier told the MPs."I very much doubt there will be a flight of talent towards Asia or elsewhere."
Last week EU regulators finalised guidelines calling for Europe's best-paid bankers to get only 20 per cent of their next annual bonus upfront in cash.
Barnier told the committee that there could be no return to "business as usual" following the financial crisis. "Otherwise the liberal free market principles which we all believe in could be seriously at risk," he said.