NATIONAL regulators across the European Union have until the end of this month to show they are not damaging the single market by being too heavy handed with banks from elsewhere in the bloc, the EU's executive European Commission said yesterday.

It reminded them in a letter last Friday that the free movement of capital is a founding tenet of the single market.

Yesterday, the commission said in a statement that on several occasions national supervisors have acted independently to impose "allegedly disproportionate prudential measures" on local arms of non-domestic EU banks.

"In taking such action, national supervisors did not respect the mandatory procedures, such as consulting other national supervisors of the same banking group in advance," it said.

The supervisors must inform the commission by the end of February about their "current supervisory practices" so that it can "determine any possible further steps as appropriate."

The commission, as guardian of the EU treaty, can take a country to the European Court of Justice for rule breaches that could trigger penalties such as fines.