Britain opts out of new EU financial controls

BRITISH CHANCELLOR Alistair Darling has managed to secure national regulators the upper hand when it comes to implementing new EU rules on financial supervision.

Draft proposals for a two-tier supervisory structure for the 27-member bloc released by the commission last month would allow EU authorities to over-rule national regulators in ongoing bank disputes. The new bodies, soon to be set up to police the banking, securities and insurance sectors, would also have the power to impose emergency measures, including a restriction on short-selling during future financial crises, and would control pan-European credit-rating agencies and central party clearing houses.

The majority of member states – including Ireland – support the commission’s plan, but Britain, backed by Slovenia and Romania, got changes written into the text that specify EU decisions cannot “impinge in any way on member states’ fiscal responsibilities”.

Mr Darling, who called his opposition a “matter of principle”, said after a meeting of European finance ministers in Luxembourg on Tuesday that the EU had no authority to impose its will in budgetary matters, such as requiring one member state to bail out a subsidiary bank in another.

“The thing that concerned us . . . was a proposal whereby there might be an agreement reached by regulators at European level that would have had fiscal consequences for domestic governments,” he said. “There is a principle here that tax is clearly a matter for member states.”

How to resolve disputes concerning cross-border banks has been an issue niggling EU policymakers for years. Fortis bank, recently broken up between the Dutch and Belgian governments, is one example. After months of infighting, the Dutch government nationalised their operations, and Fortis branches in Belgium and Luxembourg were sold off to French bank BNP Paribas.

The UK chancellor also came out against the commission’s plan to appoint the head of the European Central Bank as the chair of a new risk warning board as part of the overall financial package.

However, the EU’s economic affairs chief Joaquín Almunia as good as said Britain was likely to be outvoted when the issue is discussed at a summit of EU leaders in Brussels on June 18th.

Talks on the changes raised by the UK are likely to continue beyond the autumn, when the commission will come out with draft legislation for the new system.