EU finance ministers will consider amending financial regulations to provide more transparency and better monitoring of banks' assets in the wake of the subprime mortgage crisis.

However, they agreed yesterday on a strategy that will leave the final say on whether state funds can be used to bail out ailing banks in the hands of the European Commission.

"On the management of financial stability, clearly it's the commission that will be competent to decide whether or not some intervention should be taken," Portuguese finance minister Fernando Teixeira dos Santos told journalists.

The issue jumped to the top of the agenda at an EU finance ministers meeting in Luxembourg following a decision by Britain to extend its guarantees to Northern Rock. The troubled bank revealed the Treasury had agreed yesterday to guarantee new retail deposits and extend its emergency funding line.

At the meeting, EU economic and monetary affairs commissioner Joaquin Almunia said decisions on state aid were purely for the commission, the bloc's top antitrust body.

The text of the final conclusions for the meeting had to be changed following the intervention of the commission, which zealously defends its power to determine state aid decisions.

The draft conclusions had said the commission would reach a common understanding with EU states on conditions for bailing out a bank.

These were changed to the commission "would be invited, without prejudice to its assessment on a case-by-case basis and respecting the EU executive's powers, to work with states in such instances".

The commission did, however, agree to speed up decision- making in the field of state aid for banks to provide flexibility.

In the case of Northern Rock, the British authorities have not yet notified the commission that they have offered state support to the bank.

The conclusions of the meeting also produced a set of draft common principles for addressing financial crisis management in the EU.

The principles clearly state that the objective of crisis management is "not to prevent bank failures" and the "use of public money should never be taken for granted".

In the coming months EU officials will look at ways to require more disclosure by banks on their holdings of complex financial instruments. They will also reappraise the role of credit-rating companies when assessing financial risk.

States will also consider whether to include in the mandates of national market watchdogs the need to take into account EU as well as domestic aspects in financial stability decisions.

States also agreed to consider the feasibility of revising rules for winding up banking groups to include joint insolvency proceedings for cross-border banks, and to have a more interchangeable system of national deposit guarantee schemes. - (additional reporting: news agencies)