Europe should learn lessons from the near-collapse of British mortgage lender Northern Rock in the wake of the U.S. credit crisis.
But he said he saw "no chance" of a single European supervisor being appointed to watch over banks that do business in several European nations.
EU Internal Market Commissioner Charlie McCreevy called instead for a college of supervisors to watch each of the dozens of banks spread over several of the EU's 27 nations.
The September run on Northern Rock showed the need for clearer supervision over large pan-European banking groups, he told a financial services conference organized by Paris-based think tank Eurofi.
"Imagine a long line of depositors queuing up outside bank branches say in the United Kingdom, France and Spain. What would have been the reaction of the politicians and supervisors in the respective member states?" he said. "Would the same message be delivered to the depositors in the U.K., France and Spain?"
Banks are currently monitored by their national supervisor. Until recently, few banks did substantial business outside their homeland, though that has changed rapidly in the last few years as banks have snapped up rivals elsewhere in the region.
Italy's UniCredit leapt into Europe's top 10 lenders by buying Germany's HVB two years ago, while Spanish bank Santander, Franco-Belgian counterpart Fortis and Royal Bank of Scotland recently won a joint bid for the Netherlands' ABN Amro.
McCreevy said the financial turmoil unleashed by the rising number of bad debts in the U.S. housing market was a wake-up call for everyone in the industry.
"The effects of the U.S. subprime crisis have resulted in a small number of national financial institutions having to be bailed out," he said. "The speed at which the subprime crisis in the U.S. spread to the EU took everyone by surprise, including the banking regulators and supervisors."
Europe's current regulatory framework was based on a national system that was out of date when it came to large banks, he said.
"There is an urgent need to put in place a more effective cooperation and coordination process between supervisors who are responsible for overseeing large banking groups," he said.
"My political antenna tells me there is no chance that we would find agreement on an EU supervisory agency," he told the conference. "I see no reason why we should not work to have a college of supervisors for each cross-border banking group."
A model for this is already in place for regulating the stock exchanges Euronext and LIFFE, he said.
Italian Finance Minister Tommaso Padoa-Schioppa told EU finance ministers meeting in Brussels on Tuesday that he did not want to cede oversight over banks to a European regulator. EU nations will talk about possible changes to the current system next April.
McCreevy also said he would shortly propose that the EU would accept company accounts filed under the U.S. GAAP system without reconciliation after the U.S. Securities and Exchange Commission said it would accept the IFRS standard used in Europe.
On the European mortgage market, he said he would publish plans later this month to encourage a wider choice of loans and a decent level of consumer protection - but did not see the need for any EU-wide rules for the sector at this stage.