Burden sharing restricts EU financial reform plan

* EU's McCreevy says financial supervision must be reformed

* Urges states to set aside vested national interests

* Regulators say lack of burden sharing deal a hurdle

By Huw Jones

BRUSSELS, May 7 (Reuters) - EU states should think "outside the box" to streamline financial supervision, a top EU official urged on Thursday, but regulators said not having a deal on bailing out cross-border banks would limit the scope of reform.

European Union leaders have agreed that oversight of banks, insurers and markets is too fragmented and change is needed to apply lessons from the credit crunch such as having pan-EU data on whether risk at one bank can destabilise the broader system.

A blueprint from former Bank of France governor Jacques De Larosiere to create two new bloc-wide oversight bodies will form the basis of reform, but has already raised hackles even before draft laws have been published.

"People have to look at the bigger picture," EU Internal Market Commissioner Charlie McCreevy said.

The integration of Europe's capital market must be logically followed up with more integrated supervision, he said.