Britain Fights EU Oversight Plans, Insists on National Control
Britain will fight proposals today to lash London’s banks to European Union oversight, deepening the EU divide over how to prevent future financial shocks.
At an EU summit in Brussels, Prime Minister Gordon Brown will defend the U.K.’s powers as the sole supervisor of the more than 600 British and foreign banks that make London Europe’s financial center.
“We believe emphatically that we must retain a clear and ultimate linkage between national responsibility for supervision and national responsibility for handling the consequences of failure,” U.K. Treasury Minister Paul Myners said in an interview yesterday in London.
The clash over policing the banks may overshadow a summit meant to take stock of efforts to turn around the worst recession since World War II and to complete work on legal guarantees to persuade Irish voters to pass the bloc’s new governing treaty, which they rejected last year.
European governments have spent more than 165 billion euros ($229 billion) to shore up banks staggering from $454 billion in writedowns and credit losses, about a third of the worldwide total of $1.46 trillion.
The regulatory proposals are Europe’s answer to President Barack Obama’s bid to refashion supervision of the U.S. financial system, the epicenter of the crisis.
Political setbacks at home increase the pressure on Brown to fend off European regulation. Fresh from reshuffling his cabinet and stifling a rebellion within his Labour Party, Brown is trying to reassert his leadership with polls showing him facing defeat in an election looming within a year.
‘Political Reasons’
Britain is holding out “for domestic political reasons, Brown being extremely weak, the Tories waiting to come into power,” said Karel Lannoo, head of the Centre for European Policy Studies in Brussels. “The biggest problem is Britain. I don’t think what they’re doing is in the interest of the future perspective and competitiveness of the City.”
In the battle over financial oversight, Britain says European Commission proposals to stiffen cross-border supervision could force British taxpayers to pay for bailouts or recapitalizations that are ordered by a central regulator no fax cash advance.
The proposals would make banking supervision more uniform by giving EU agencies powers to overrule national authorities when there are disputes between countries.
As the largest of the 11 EU countries not using the euro currency, Britain also opposes putting the president of the European Central Bank in charge of a board to monitor systemic risk.
‘Right Direction’
Luxembourg, a country of 400,000 people that relies on financial services for a fifth of its economy, believes the proposals “go in the right direction,” Prime Minister Jean- Claude Juncker said yesterday.
While an outnumbered Britain could be outvoted on the financial proposals, the EU tradition has been to seek consensus ever since French President Charles de Gaulle boycotted EU meetings in 1965.
Chancellor of the Exchequer Alistair Darling signaled Britain’s opposition at a June 9 meeting of finance ministers, who agreed that EU regulators “should not impinge in any way on member states’ fiscal responsibilities.”
The EU goal is to plug regulatory holes that, for example, hastened the demise of Fortis, a bank caught in the crosscurrents of Dutch and Belgian supervision when the financial crisis escalated in October.
Fortis Fight
As the Dutch government bought most of Fortis’s Dutch operations, shareholders initially vetoed a sale of most of the Belgian side to BNP Paribas SA. The sale only went through after six months of wrangling.
Also up for discussion at the two-day summit are proposals that would give authorities power to regulate rating companies and clearing houses for derivatives trading, and impose rules on short-selling in emergencies.
“I would stress that we are on common ground with most other European countries as far as the broad thrust on the need for cooperation, information sharing, European regulation, enhanced standards of supervision,” Myners said.