European Union (EU) countries were expected to reach a deal on an overhaul of financial supervision in the 27-nation bloc by the year end, the EU presidency said on Thursday.

It is the EU Presidency's ambition "to have all the (reform) package signed in December," Swedish Finance Minister Anders Borg told reporters after chairing informal talks with his EU counterparts in the Swedish port city of Gothenburg.

Sweden, currently holding the EU rotating presidency till the end of this year, takes financial supervision as a top priority for its six-month agenda.

The European Commission last week adopted an important package of draft legislation to significantly strengthen the supervision of the financial sector in Europe, both on the macro and micro levels.

On the macro level, the legislation will create a new European Systemic Risk Board (ESRB) to detect risks to the financial system as a whole with a critical function to issue early risk warnings to be rapidly acted on.

On the micro level, it will also set up a European System of Financial Supervisors (ESFS), composed of national supervisors and three new European Supervisory Authorities for the banking, securities and insurance and occupational pensions sectors.

The package needs approval from EU governments and the European Parliament to become law. The commission hoped it could come into force in 2010.

It was the first time that EU finance ministers had discussion on the draft legislation.

Borg said EU finance ministers were poised to agree on the micro-level reform later this month, while a deal on the macro-level reform was expected in December.

But Britain had expressed certain reservations concerning the future leadership of ESRB and the power of three new European Supervisory Authorities to override national decisions.

It had been suggested that ESRB should be led by the governor of the European Central Bank (ECB), which is the central bank of eurozone countries. This has drawn concern from EU countries outside the euro zone, including Britain.

Under the commission's proposal, the three new European Supervisory Authorities would have the power to make a final decision if two member states cannot agree with each other. Britain wants that power to be strictly limited.

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