Brussels - The European Commission was Wednesday expected to recommend the creation of a pan-European financial watchdog and issue guidelines on how to dispose of toxic assets held by European banks.

The call for a European-wide supervisory body is contained in a report by Jacques de Larosiere, a former head of the International Monetary Fund (IMF) and of the French central bank.

De Larosiere was asked by European Commission President Jose Manuel Barroso to provide ways of preventing a repeat of the current financial crisis at a time in which banks have become increasingly international.

According to the Financial Times, initial resistance to a European supervisory body has waned in London, home to the continent's largest financial centre.

The European Union's executive body was also expected to issue a series of recommendations on how governments should dispose of their countries' "toxic" - or "impaired" - assets.

The guidelines are designed to ensure a level playing field within the 27-member bloc.

The International Monetary Fund has estimated that total bank losses due to the circulation of such bad assets could eventually reach
2.2 trillion dollars. Others believe a more realistic figure is 3.6 trillion dollars for the United States alone. (dpa)