By Ben Shore
Europe business reporter, BBC News, Brussels
Fortis' rescue was a good example of cross-border co-operation
The European Commission has proposed tight controls on banks operating in the European Union.
The phrase Capital Requirements Directive doesn't exactly trip off the tongue but, once you overcome the language barrier, underneath lies a pretty radical set of proposals in this amendment to existing legislation.
What the EU's internal markets commissioner, Charlie McCreevy, is trying to do is change the psychology of European banking by making bankers put their money where their mouths are.
The requirement that "originators" of financial products must retain a 5% stake in the products they sell could have a transformative impact because it will mean if a product loses money, so does will the bank.
The other element of the directive which will raise bankers' eyebrows is a change to the rule over the amount, and type, of loans they can make to each other.
Currently banks are prevented from loaning more than 25% of their loan capital to another counterparty, however there is an exemption to this rule on loans which mature in under a year.
Banks exploit this loop hole to lend large sums to each other for short periods of time.
This loop hole is to be closed, therefore banks will never face more than 25% exposure to another bank.
This is squarely aimed at stopping "contagion" - the process by which a problem at one bank can cause problems at another.
The idea is that by sharing information national regulators will be able to spot problems beyond the horizon, and so act more quickly to avoid disaster
Bankers will hate both measures for inhibiting their freedom to act.
But there is one change that has received a cautious welcome from most quarters.
This is the creation of groups of banking regulators from different countries called "colleges".
The idea is to shift the focus of banking regulation from the national level, to the international level, something that almost everyone agrees is necessary.
The problem for Europe is that although it is in theory a single market, the mechanisms to cope with companies that cross borders haven't kept up.
It is therefore possible for a banking regulator in, say, Belgium, to be doing its job perfectly adequately only to find one of its biggest banks is about to run out of cash because of its operations in France.
By sharing information, national regulators will be able to spot problems beyond the horizon, and so act more quickly to avoid disaster.
The co-operation between French, Belgian, Dutch and Luxembourg authorities over the collapse of Fortis and Dexia was noted by the commission as an example of how cross-border co-operation could work.
Whatever other criticism can be levelled at those governments, they acted quickly and decisively - coming to agreement literally overnight in the case of Dexia.
But as with many things that emanate from the European Commission, the delay between proposal and legislation can be vast.
It is not thought the Capital Requirements Directive will come into force until April 2009 at best. That's too long to have any impact on the current crisis.