PM stands firm on bank supervision

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He backed plans for tougher cross-border supervision of financial banks and bodies, but insisted that ultimate control and responsibility had to rest with national authorities.

After two hours of talks, his pressure paid off with an agreement on a form of words ensuring that any agreement on decision-making powers for an EU body cannot "impinge in any way on the fiscal responsibilities of the member states".

EU leaders were considering sweeping European Commission proposals for a new supervisory system in the wake of the economic crisis.

But Mr Brown said decisions affecting the City of London could not be made in Brussels.

"It is only logical that supervisory decisions with an impact on taxpayers must be taken by national authorities," he insisted.

He pointed out that the City contained about 420 European banks, generating more than £210 billion worth of financial flows in and out of London every year.

The EU financial monitoring and control proposals due to be endorsed formally at the summiton Friday now include a new declaration.

It states: "Recognising the potential or contingent liabilities that may be involved for member states, the European Council (summit) stresses that decisions taken by the European supervisory authorities should not impinge in any way on the fiscal responsibilities of the member states."

The clause improves the Commission's chances of getting unequivocal backing for the setting up of a European Systemic Risk Board (ESRB) - an independent body intended to "exercise macro-prudential supervision over all financial sectors".