London  - On the eve of a EU summit expected to tackle the question of EU-wide financial oversight, Alistair Darling, the Chancellor of the Exchequer, Wednesday emphasized his clear preference for national regulation.

"We have to ensure strong, effective regulators at a national level - and retain the vital link between home regulators and national governments," he said.

He made the remarks in his annual Mansion House speech to the city, and warned banks that they needed a "change of culture" in the wake of the financial crisis.

Darling however welcomed proposals announced earlier Wednesday by US President Barack Obama for an overhaul of the US system.

At the summit meeting in Brussels Thursday and Friday, the European Union leaders are to address the question of how to put their national budgets and financial systems back in order after the turmoil of the winter's economic crash.

According to a draft summit declaration, they are set to approve a call for a "reliable and credible exit strategy" from their current deficit-spending spree, although without naming a deadline.

They should also approve the creation of a new body to oversee Europe's macro-economic stability, and three agencies to analyse the safety of its banks, insurance companies and stock exchanges.

But the draft statement is silent on the controversial questions of whether the macro-economic body should always be chaired by the head of the European Central Bank, and whether the three micro- economic agencies should be able to force member states to intervene in financial firms. Britain fiercely opposes both ideas.

Darling noted that people were advocating new institutions, which he said may be important.

"But to concentrate only on institutions, seems to me to miss the point. At its heart, this is about judgments that are based on an a clear understanding of what's happening. It is about making the right call at the right time."

The current head of the European Union, Czech Prime Minister Jan Fischer, warned against pushing Britain into the corner over the financial oversight issue.

"It is problematic to simply overrule a partner," Fischer told the Financial Times of Germany. "We still need discussion about oversight of banks, insurance companies and securities firms in Europe. And we will find a compromise."

Countries like Germany and France want to empower an oversight agency to make concrete decisions. But Britain, with London as a world financial hub, opposes strongly the proposal that a new EU agency should be given competence over individual states.

By fall, European leaders hope to have ready a proposal for legal adoption, and they need a green light on Thursday from leaders for the law. (dpa)