Prime Minister Gordon Brown is mounting a defence of the City of London against plans for legally-binding EU financial supervision in the wake of the economic crisis.

An EU summit starting later today in Brussels is considering proposals for tighter monitoring and control of banks and other financial bodies.

Mr Brown will insist that decisions affecting the City of London cannot be made in Brussels - because national authorities pick up the tab if those decisions are wrong.

A post-crisis report on the summit table recommends the setting up of a European Systemic Risk Board (ESRB) - an independent body intended to "exercise macro-prudential supervision over all financial sectors".

If approved by EU leaders, there would also be a "European System of Financial Supervisors" (ESFS), overseeing the monitoring roles of existing national supervisory bodies.

The national bodies would become part of a single European supervisory authority "endowed with legal personality".

One UK government source said: "This is extremely important because of the pre-eminence of City of London as a financial centre.

"We are very clear about this - you cannot separate responsibility for sound financial institutions from liability. In other words, we are not going to have the Commission taking decisions upon which we have to pick up the bill."

He went on: "For example, if you have banks in a particular place which the Commission says are fine, and then they go under, it is the City of London, as the dominant financial centre, which bails them out."

Mr Brown is meeting EU leaders the day after Chancellor Alastair Darling said he had no plans for fundamental changes in national oversight of financial bodies.

The Prime Minister will emphasise the UK's commitment to tougher supervision and regulation, but, according to one UK official: "This has to be thought through and sorted out in an acceptable way. We want recognition of this link between liability and responsibility.

"The Prime Minister will be prepared to talk in some detail on this."

There are about 600 banks in London, 420 of them European, all generating more than £210 billion-worth of financial flows in and out of the City every year.

Mr Brown's reluctance to cede legal power is only shared by Romania, Slovakia and Slovenia, but the UK official insisted: "There will be a lot of consideration from others about whether the British have got a point.

"We are not isolated - there are a lot of 'neutrals' who want to think about it."

No final decisions will be made at the summit, but Mr Brown would like to see a declaration making clear that national regulators cannot be over-ruled by any EU-wide supervisory body.

Meanwhile Ireland is looking for summit declarations too - legal guarantees reassuring Irish voters that the Lisbon Treaty will not affect Irish tax policy, neutrality, abortion laws or workers' right.

The hope is that the pledges will ensure a 'yes' vote in a controversial second referendum intended to reverse the 'no' delivered by Irish voters to the Treaty a year ago.

The Treaty is intended to streamline EU decision-making and avoid bureaucratic gridlock as the Union continues to expand.

But it cannot come into force until the Irish say 'Yes' and until Poland and the Czech Republic complete ratification.

The Irish vote is seen as the biggest hurdle, and the UK - which wants to see the Treaty in force - is worried that the technical arrangements for giving the Irish the guarantees they want could open up the risk of another UK ratification.

EU leaders are also expected to back the reappointment of Jose Manuel Barroso for a second five-year term as EU Commission President.

Tonight over dinner in Brussels, Mr Barroso will - at French insistence - face what amounts to a new job interview, setting out his aims and hopes for another term.

Any summit endorsement of Mr Barroso will require majority support from Euro-MPs in a vote next month - and no political faction has offered up a rival candidate for the job.