FINANCIAL REGULATION:BRITISH PRIME minister Gordon Brown has pledged to fight proposals that would enable EU supervisory bodies to overrule national regulators overseeing the banking sector.
He has also promised to protect the City of London, which is currently the pre-eminent financial centre in Europe.
“It is only logical that where a supervisory decision will have an impact on the taxpayer, that decision should be for the relevant national authority,” said Mr Brown shortly before EU leaders sat down to discuss a shake-up of supervision.
The European Commission plans to create a series of new pan-European supervisory bodies to monitor the financial system to detect the build-up of risks.
One element of the new system would provide a network of pan-European supervisors with the power to overrule national financial regulators not complying with common EU technical standards. This could enable an EU body to order a national supervisor to intervene in a case even though the national authorities may have to bail out a bank.
British diplomats said last night they had managed to achieve a significant victory at the summit by getting their EU partners to agree that national supervisors would retain the final say over decisions that could have fiscal impact. The formal summit conclusions are now expected to be changed to include a line stating that EU regulators “should not impinge in any way on member states’ fiscal responsibilities”. But Britain is likely to face a long battle over the next year with France and Germany, which are pushing hard to overhaul the entire EU financial supervisory structure.
The City of London has reacted angrily over separate regulations proposed for the hedge fund sector. Britain has also raised concerns about a proposal to make the ECB president the chair of a new systemic risk council, which will be formed to monitor for potential macroeconomic problems. It wants the position of chairman to be open to the central bankers from non-euro-zone states.
Ireland, which had in the past taken a sceptical view of EU regulation in the financial sector, has shifted its position in the wake of the financial crisis. It now favours sharing more financial sovereignty with its EU partners.
