A watered-down reform of regional supervision of money managers and other financial firms was backed by European Union member states on February 12. But some top EU officials warn it could leave open critical regulatory loopholes before Brexit.

Initially proposed by the European Commission in 2017, the plan was meant to avoid a situation under which national regulators could offer sweeteners to London-based financial firms after Brexit.

As reported by the Reuters news agency, smaller EU states had tried to completely block the reform, fearing it would reduce their power to attract foreign financial firms.

But after pressure from larger states led by France and Spain, a compromise was reached by EU finance ministers meeting in Brussels on Tuesday, an EU statement said.

The compromise “does not match the high level of ambition” of that proposal, said Financial services commissioner Valdis Dombrovskis. But he added he could accept it as it was important to move forward with the reform.

Luxembourg was one of the EU states that most opposed the overhaul. The Grand Duchy’s finance minister Pierre Gramegna argued against changing the agreed text in talks with the European Parliament.

According to Reuters, EU negotiators will now need to find common ground between governments and lawmakers for the reform to become law before EU Parliament elections in May.