Luxembourg – Britain said it fought off European pressure on Tuesday to yield some of London’s powers for overseeing its vast financial services sector to EU authorities.
In May, the European Commission proposed to set up new EU authorities to oversee banks, insurers and other financial groups, which would have powers to overrule national regulators.
However, London, which is home to the biggest financial sector in the world, fears the new authorities would be able to order governments to carry out costly bailouts of financial groups with taxpayer cash.
British finance minister Alistair Darling said he had convinced his EU counterparts at a meeting in Luxembourg, to revise the proposals to ensure the new authorities could not impose such decisions on governments.
"What we can’t have is an extreme situation where somebody outside a member state is telling a particular government that it’s got to take some fiscal action," Darling told journalists after the meeting in Luxembourg.
Britain, which does not use the euro, also has qualms about a commission proposal for a new "European Systemic Risk Board" to be chaired by the president of the European Central Bank. Darling also managed to get that issue left open.
However, EU Economic and Monetary Affairs Commissioner Joaquin Almunia voiced confidence that Britain’s opposition to the ECB chairing the new risk watchdog could be overcome.
"The ECB is not only the central bank of the 16 countries of the euro area," he said. "The ECB is the head of the European system of central banks that includes the 27 member states."
Despite Britain’s concerns about EU intrusion in regulating its financial sector, Darling insisted that London was otherwise broadly in favour of greater cooperation among supervisors at all levels.
"We’re very clear that we must have greater cooperation between European regulators and we must make sure that we plug the gaps that have become apparent in recent years," he said.
Britain found support from Slovenia, Slovakia, Romania and to a certain extent Finland for London’s reservations towards the commission’s proposals, which are supposed to be implemented over the course of 2010 after Brussels revises them later this year.
Although the financial crisis is rooted in the US housing market, European banks have suffered dearly from the turmoil, especially since many had liabilities supported by less capital than some of their US counterparts.
As a result, many European countries rushed to bail out banks and guarantee lending between them in the midst of a crisis of confidence in the sector in 2008.
However, EU governments have struggled to coordinate their support for struggling banks, with no pan-European authority really in charge of overseeing the sector.
Ahead of the meeting, the International Monetary Fund threw its weight behind the shake-up of the financial sector.
"The crisis has indicated beyond doubt the need for new financial stability arrangements in Europe," the head of the IMF’s European department Marek Belka told eurozone finance ministers on Monday.
"The considerable momentum that has been built in recent weeks to make historic changes to these arrangements should be fully seized."
AFP / Expatica