UK urged to ready veto on EU bank supervision plan
By Huw Jones
LONDON, Nov 16 (Reuters) – A sweeping European Union reform of financial supervision could turn into a muddle which Britain should veto unless there are tougher national safeguards, a UK parliamentary report said on Monday.
A draft EU law proposes to set up a new European Systemic Risk Board (ESRB) next year to warn about hotspots like asset bubbles and recommend action before they destabilise markets.
Three new pan-EU supervisory authorities for banks, insurers and securities markets would police a single EU rulebook and have powers to make binding decisions on member states.
EU states and the European Parliament have the final say and the bloc’s leaders want a political deal among member states on Dec. 2, less than three months after the draft was published.
“We consider that is too fast: the proposals will set in place a framework which should last for many decades, and there should be proper time for consideration, otherwise, this could end up as a recipe for a muddle,” Treasury Committee Chairman John McFall said.
The committee’s report backs the reform in principle to promote financial stability and plug regulatory gaps highlighted by the credit crunch. It also does not want undue delay to avoid banks thinking they can return to “business and usual”.
But the committee of lawmakers from Europe’s biggest financial and banking centre say in their report the speed of reform is overambitious and some details pose serious problems.
The main recommendations include:
— The legal basis of the new supervisory authorities should be clarified before they are set up as they may be open to challenge in the European Court of Justice;
— There should be permanent non-euro zone representation on the new risk board’s steering committee;
— The new authorities should not have the power to directly intervene in a bank or other institution in a member state;
— The EU’s executive European Commission should not have the power to unilaterally declare an emergency, a step which confers additional powers on the new authorities to intervene in a bank or other institution;
— Stronger safeguards in the form of a national veto are needed to stop binding decisions made by the new authorities impinging on national finances, such as ordering a bank bailout;
The draft law needs unanimity among EU states to be adopted and the report says Britain should wield its veto if there are any attempts to split the reform into sections.
Britain should also use its veto if legal uncertainties are not cleared up, fiscal safeguards not strengthened or plans to allow the Commission to declare an emergency not scrapped.
“It may be that these issues can be resolved by 2 December,” the report said.
“However, we think it highly unlikely this will happen and we urge member states to consider a more measured and realistic timetable for reform of the European supervisory and regulatory system,” the report said.
(Reporting by Huw Jones, editing by Patrick Graham)
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