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