Gordon Brown has signed up to common EU rules for financial supervision but fended off attempts to give new pan-European watchdogs the power to order governments to bail out struggling banks and other bodies.

Mr Brown agreed at a summit of EU leaders in Brussels to "a single rulebook" of standards for all European financial institutions as a way of removing differences which have caused difficulties in ensuring compliance from cross-border companies.

The plans are a core part of the EU's response to the financial crisis to restore confidence and most European leaders want to push ahead quickly with a new two-tier supervisory system under the model proposed by Jacques de Larosiere, former governor of the Bank of France.

Three new European authorities will get binding powers to oversee and investigate the cross-border banking, insurance and pensions, and securities sectors, and to mediate in disputes between member states.

They will be able to make recommendations of action but Mr Brown insisted that he had defended Britain's right to retain control over decisions which have direct fiscal consequences in the face of pressure to surrender ultimate control to the European level.

Supervisory colleges for all major cross-border financial firms in the EU will be set up by the end of the year.

Mr Brown also agreed to the creation of another body, the European Systemic Risks Council, which will act as an early warning mechanism for potential bank failure. But it appeared that he had failed in his attempt to stop the chairmanship of this being handed to the European Central Bank, which a number of countries outside the eurozone felt would disadvantage them.

British diplomats have been urging caution against a rush to regulate and tonight’s agreement will result in the European Commission coming out with detailed legislation to set up the new system later this year.

The current EU committees of supervisors will be beefed up and turned into bodies called the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority.

Mr Brown said: "The fiscal authority in the case of Britain is Britain."

He added: "First of all we need common rules and second we need a system of audit. Thirdly we need mechanisms by which there is cross border supervision.

"Most of the crises that have hit our country are as a result of problems which started in banking operations of these banks in other countries.

"At the end of the day it is the national authorities that will have to take the financial responsibility for dealing with the problems of an individual bank or an individual company. When we had to take action with the Royal Bank of Scotland or Lloyds TSB or Northern Rock it was British public money which had to be used to do so.

"That is why the decision for any fiscal action has got to be one that has to be taken by the authority that has the resources to enable them to do so and that is the national government. It is what was agreed at Ecofin. People understand that where there is a fiscal responsibility that the national government has got to make that final decision."

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