EU to set stage for bank policy

The last so-called Ecofin meeting was in October and occurred at the zenith of the European phase of the financial crisis, with European governments frightened about which bank would need rescuing next.

At that time, Fortis and Dexia in Belgium, Unicredit in Italy and Hyporeal in Germany were all causing concern, on top of the woes of the British banks: HBOS and RBS.

For this meeting the mood, although hardly cheerful, is less emotionally charged.

The tactical response to the banking crisis has created a life support system for international banking, with capital injections and loan guarantees preventing a catastrophic collapse.

What next

In fact, it could be argued the European governments, led by President Sarkozy of France and by the British Prime Minister Gordon Brown, have mounted a strong rearguard action.

Now the debate has moved to the question of what happens next.

The French, who occupy the rotating presidency of the EU, are apparently leading the way.

Officials in Brussels are muttering about a document doing the rounds, which includes detailed proposals on the way banks are regulated.

Emergency summit

These proposals would not apply simply to European states, but all international banks.

Bear in mind that this Ecofin is taking place ahead of an emergency summit of European heads of state on Friday and a meeting of the G20 industrialised nations on 15 November.

The stated aim of this series of meetings is to create a new "financial architecture" to prevent the calamity of the past months re-occurring.

The French clearly want to shape the terms of any settlement that comes out of Washington, so are trying to create a consensus among their European partners before crossing the Atlantic.

However, a consensus is not always easy to achieve. Some other EU governments are wary of turning up in Washington with a clear set of proposals for fear of annoying non-EU members of the G20 who may feel cornered.

Sovereign lunch

While all these big questions are in play, there is an interesting lunch taking place during the day as representatives from three of the biggest sovereign wealth funds sit down with finance ministers.

Sovereign wealth funds are investment funds controlled by national governments - in this case, those of Norway, Abu Dhabi and Qatar.

With the gaping holes that have appeared in bank balance sheets, funds with lots of spare cash have suddenly become very interesting indeed to western leaders looking for financial help.

But clearly there are political difficulties with another country owning important national assets. This meeting is intended to find out how those difficulties can be overcome.

Tuesday's Ecofin may receive less attention than what happens in Washington in a couple of weeks.

But Washington's conclusions could be shaped by what happens in Brussels in the next few days.