After the worst market turmoil in 80 years, there has been much talk of how to tighten financial regulations to prevent similar crises. With many banks operating across Europe, the European Union decided that a new system of supervision was needed that would enable the different country regulators, such as our Financial Services Authority (FSA), to co-ordinate their efforts.

In October the European Commission appointed a committee led by Jacques de Larosière, the former director-general of the IMF, to work out what this cross-border supervision might look like. Each country must submit its preferences by Christmas and an option is likely to be chosen in the spring.

The City of London Corporation, which represents the Square Mile, envisages five possible outcomes:

1 Colleges of supervisors: This is the lightest-touch option and would mean little change to the status quo. Colleges of supervisors that will operate across European member states are already being set up and the G20 has proposed that colleges should also be appointed by March. But with no status in law, some say they could not enforce anything.

2 A common rule book: All national supervisors, such as the FSA, would have to enforce a single set of rules. This option is unpopular, though some smaller member states like it — inscribing the rules in the laws of each individual country would be time-consuming and impractical. There are fears that it could end up as an overly prescriptive collation of all member state rules, which could be inappropriate for some markets.

3 Existing committees become EU agencies: Legislation would give EU agency status to the three committees that work to make financial sectors compatible across Europe: the Committee of European Banking Supervisors; the Committee of European Securities Regulators ; and Committee of European Insurance and Occupational Pensions Supervisors.

Countries would retain their individual regulators but these would be overseen by the three higher level agencies. The agencies would be able to enforce the directions given by the colleges of supervisors but critics say that this option could result in decisions being too remote from the market.

4 A single financial supervisor: This would involve changing the treaty to create a single regulator or system of European regulation, replacing the 27 individual regulators. This suggestion has been well received by some banks in the UK, possibly because London's status as a financial centre means that a single regulator could end up being similar to the FSA.

5 Single supervisor for the eurozone: A single regulator or system is created for the eurozone, excluding the United Kingdom.

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