FACTBOX-How the EU wants to revamp financial watchdogs

Sept 23 - The European Union has unveiled a blueprint for overhauling the way banks and financial markets are policed, a central part of new rules designed to prevent a repeat of the economic crisis.

Here is an outline of the plan:

EUROPEAN SYSTEMIC RISK BOARD

* It will sound its sirens if it sees threats to the financial system, such as those that triggered the present economic crisis.

* It will be able to issue warnings, saying what should be done about risks in the financial system. It could order a country to take action, for example, and that country would be obliged to explain itself if it did not take action.

* The warnings will be weighty and those who receive them must act although the board will have no binding power in a legal sense, relying rather on political pressure for influence.

* Warnings could be made public after a vote by the committee in charge of the Risk Board.

* The body would, in effect, be an arm of the European Central Bank (ECB). Staff will mostly come from the ECB which will also appoint the head of its secretariat.

* It will be managed by a so-called general board including the ECB president, governors of the region's central banks and a member of the European Commission, the EU's executive.

* Its chair will be elected by EU central bankers. Many observers believe this makes the head of the ECB, Jean-Claude Trichet, the most likely person to have the post.

* The chair will be powerful and able to call extraordinary meetings of the board, where he or she also will have a casting vote. The chair will be the public face of the body.

PAN-EU SUPER-WATCHDOGS

* Three new groups will watch banks, insurers and exchanges -- the European Banking Authority, the European Securities and Markets Authority, and the European Insurance and Occupational Pensions Authority. They replace three advisory bodies.

* They will set the bar for supervision standards and establish uniform rules around Europe -- their rulebook will become European law.

* They can tell national supervisors, such as Britain's Financial Services Authority (FSA), what they should be doing.

* If the European Banking Authority, for example, believed the FSA was not meeting EU standards for supervision, it could order it to take action within a month.

* If the situation persisted, the European Commission could step in and demand the national watchdog take specific action. That supervisor would have to oblige, or explain when it intended to do so within 10 days.

* A lack of coordination among national supervisors has been blamed, in part, for the financial crisis. In future emergencies, the European Banking Authority will be able to tell a group of country supervisors to take joint action.

* If a country watchdog challenges such an order, the Banking Authority can ultimately overrule it, but only in cases where the local supervisor's "action or inaction", for example, threatened investors or depositors.

* The securities and markets watchdog will exercise direct power over credit rating agencies, whose generous ratings on packages of loans that later unravelled have been blamed for helping cause the crisis.

* The Systemic Risk Board will be able to ask these super-watchdogs or country supervisors for information such as what a troubled bank's exposure is to a risky region such as eastern Europe or a country such as Iceland.

* There is an obligation on the new supervisory authorities and European countries to hand over information to the Board, which can drill down as far as specific companies.