New bodies to boost power of EUover City
FOUR new EU watchdogs are being set up in a huge shake-up of financial regulation which will see national regulators lose influence.
Subject to a vote in the European Parliament, the new regulators will oversee securities, banking and insurance. The banking division will be based in London; securities will operate from Paris. Frankfurt will be home to the insurance regulator. Day-to-day supervision of individual financial institutions will remain with national bodies like the Financial Services Authority (FSA). However, the new bodies will set up a new rule book to cover all EU financial institutions and will work towards harmonisation.
A fourth body – the European Systemic Risk Board – will monitor the stability of the financial system and ensure EU laws are implemented the same in every country. Based in Frankfurt, it will be made up of central bankers and will be supposed to spot future crises in advance.
The agreement, to be implemented next year, states that “no decision adopted impinges in any way on the fiscal responsibility of member states” – meaning, in theory, that Europe cannot dictate how a UK government spends money. In ordinary circumstances, however, governments will not be able to block decisions they do not agree with; there will be majority voting. Governments would only be able to try and block a decision in the event of a crisis, under a complex appeals procedure which analysts said last night would prove difficult to implement. In such a case, a contested decision could be halted using an “emergency brake” and referred to an EU summit, where decisions would be taken by consensus.
However, such a lengthy process would be unlikely in a crisis where decisions need to be taken in a matter of hours, suggesting that in practice vetoes will all but disappear.
FAST FACTS SARKO ROW
• Yesterday the British Bankers’ Association (BBA) rounded on President Sarkozy over his “hostile” comments about “freewheeling Anglo-Saxon” financiers.
• Tomorrow Sarkozy is expected to quell the furore by appeasing Westminster and the City on a planned trip to London.