Talks have collapsed between European lawmakers and diplomats to agree new controls for hedge funds, following a dispute that many fear will spoil Brussels' attempts to overhaul the regulation of finance.
On Thursday, the parliamentarian leading negotiations with European countries said he had disbanded efforts to reach agreement with diplomats this month, a deadline set by officials to agree rules to clamp down on hedge funds and private equity.
"The Spanish presidency (of the European Union) informed me it would not be possible to reach a deal before the end of June," Jean-Paul Gauzes told Reuters.
He was referring to attempts to find a compromise between countries and the European Parliament, which have an equal say in writing EU law.
"I have yesterday taken the decision to delay the vote until the second parliamentary session in September," the French lawmaker added, signalling a lapsing of the summer deadline.
One diplomat accused parliament of putting the 27-country European Union's overhaul of banking regulation at risk.
"The parliament is being very assertive," he said. "But by putting their foot down, the whole thing could fall through."
The breakdown happened shortly before EU leaders including German Chancellor Angela Merkel and French President Nicolas Sarkozy travel to Toronto for a meeting of the Group of 20 major economies.
They want to champion Europe as a model for ambitious regulation, but an impasse over hedge funds and watchdogs means the EU is struggling to write laws while U.S. President Barack Obama is to sign off on rules within weeks to control finance.