The EU's top data protection supervisor, Peter Hustinx, gave the bloc's central bank until April to come up with measures "to make its payment operations fully compliant with data protection legislation," urging it to "take appropriate measures as soon as possible."

As a member in SWIFT's oversight committee the European Union's central bank had to take responsibility in ensuring the transaction network complies with EU privacy laws, he said.

"Just as other banks, the ECB can not escape some responsibilities in the SWIFT case which has breached the trust and private lives of many millions of people," said Hustinx.

"Secret, routine and massive access of third country authorities to banking data is unacceptable," he added in a statement accompanying his final report on the matter.

SWIFT, the Society for Worldwide Interbank Financial Telecommunication, based outside Brussels, is used for global bank transactions of more than 11 million euros ($14 million) daily. It is a cooperative owned by the nearly 8,000 financial institutions in the more than 200 countries that use it.

SWIFT officials admitted in June that it had provided US authorities with a "limited" amount of data in the wake of the Sept. 11 terror attacks in 2001 but insisted it had done its utmost to protect privacy.

Under EU data protection rules, information on money transfers can be used only for banking purposes, and not for other uses, such as investigations into terrorism financing.

The European data watchdog does have teeth, and if it is not satisfied by the ECB's response by April it could takes measures including blocking the transfer of data or taking the case to an EU court.

ECB rejects responsibility

The European Central Bank swiftly issued its own press release in which it said that "the monitoring of SWIFT activities that do not affect financial stability is not a matter for central bank oversight."

"The request by the European Data Protection Supervisor to bring data protection compliance within the remit of central bank oversight would not be in line with the allocation of legal responsibilities," the bank added.

The ECB has investigated possible options to using SWIFT services and has had to conclude that at this stage no feasible alternatives, it said.

In response to concerns voiced by European lawmakers, ECB chief Jean-Claude Trichet said in a letter on Wednesday that the EU and the US need to clarify the line between fighting terrorism and terror protection, Reuters reported.

"The main issue at stake is to find ways to reconcile EU and non-EU data protection legislation, as well as to maintain a proper balance between such legislation and the legal instruments applied tin the fight against terrorism," he wrote.

SWIFT is subject to both US and EU laws since it has operations in both places.