If this goes through this will be the end of London as a great
financial centre which is exactly what the EU wants. We are stuck
with Gordon Brown to defend our position in June which gives little
room for confidence.
Meanwhile the ordinary news columns of the press are so deep in the
mire and muck that are raking up about MPs’ trivia that they are
completely ignoring this threat to our very existence. Damian
McBride’s friends must be laughing at their revenge.
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==============================
European Commission President Jose Manuel Barroso Photo: REUTERS
"It's now or never," said Commission President Jose Manuel Barroso.
"If we cannot reform the financial sector when we have a real crisis,
when will we?" [That remark gives the game away. These proposals
are nothing to do with economics or finance. They are are solely
about power -cs]
Three new bodies are to be created with a permanent staff and powers
to impose decisions on member states: a European Banking Authority in
London; a European Insurance Authority in Frankfurt; and a European
Securities Authority in Paris.
Each will be composed of chief regulators from the 27 member states.
While they look much like the EU's existing "talking shop"
committees, they are in reality executive agencies able to set
binding standards and impose their overall philosophies.
The Commission said the new authorities would have powers to "settle
the matter" by imposing a decision – in effect, stripping Britain and
other countries of the national veto.
While the proposals fall short of a pan-European regulator, they may
have a similar effect. The European Court of Justice is to have the
final say over any appeal.
"This is exactly what I feared would happen," said Ruth Lea, director
of UK think-tank Global Vision. "The EU is taking advantage of the
crisis to extend its control over the British financial system. It is
very threatening because it is almost impossible to repeal anything
in the EU, however damaging it proves to be."
The Barroso plan will go to EU heads of state in June. Legislation
will be drawn up this autumn and submitted to European MPs, already
itching to ratchet up the text.
Klause-Heiner Lehne, a German MEP for the Christian Democrats, left
no doubt that this is viewed as a chance to punish the City. "It's
well-known that Gordon Brown has only the interests of London as a
banking centre in mind and not the stability of financial markets. It
must be clear to all of us that the role of the financial markets is
allocating capital, not as a playground for gamblers making huge
bets," he said.
Mr Barroso said the new machinery should be up and running in 2010,
adding: "We are not taking away national supervisors' day-to-day role."
The plan includes an "early warning" body modelled on the US Federal
Reserve's new system. Charlie McCreevy, the EU's single market
commissioner, said national regulators were not aware of problems
developing in other countries during last year's banking crisis until
they read about it in the newspapers, an untenable situation given
that 40 banks controlling the bulk of EU assets operate as cross-
border institutions, affecting everybody.
Britain has few friends in this fight other than Luxembourg, which
has its own financial centre. It hard for the UK to argue that its
"light-touch" regime has been a great success after last year's
banking debacles – although Europe's banks have yet to come clean on
their own toxic debts.
Antonio Borges, chair of the Hedge Funds Standards Board, said the
blizzard of EU proposals had been hijacked by political forces and
were "out of control".
"There is little intellectual foundation to what they are doing," he
said. "You would have thought that since 80pc of Europe's hedge funds
are in Britain, and are already regulated, that the FSA would have a
big say [on hedge fund proposals], but the FSA was marginalised. The
reality is that a great deal of regulatory power is going to Brussels."
==============================
Under the new proposals, which draw extensively on a report produced
by a group of financial experts and chaired by former Bank of France
governor, Jacques de Larosiere, three new pan-European authorities
would be set up in the areas of banking, insurance and securities to
oversee national regulators.
Several countries, including the UK and a number of new member
states, are concerned over a paragraph in the commission
communication that says the financial authorities would be given
legal powers to settle disputes between national regulators if the
situation arose.
"The European supervisory authorities should, through a decision,
settle the matter," says the document.
Some governments are now concerned that while they would ultimately
be called upon to bail out banks under their jurisdiction that run
into financial difficulty, important decisions on how those banks are
run could come from outside.
"Regulating specific firms needs to be aligned with national
authorities who are ultimately on the line when it comes to providing
emergency support for troubled institutions," sources familiar with
the UK position told EUobserver.
"If that function is going to continue to be a national one, then the
UK's view is that the regulation of firms should remain national as
well," they said, adding that the UK might challenge the legality of
the authorities' new powers.
Last resort
The commission was quick to point however that overruling a national
authority would be a situation of last resort.
Commission President Jose Manuel Barroso said the three authorities
did not constitute an attack on national powers and that national
regulators would still be the first line of defense in preventing a
repeat of the financial crisis that broke out last year.
"Our proposal is based on the principle of subsidiarity," he said.
Internal market commissioner Charlie McCreevy said they would "not
impact on the fiscal role of member states", but added that he was
surprised at member state unwillingness to act more as a group.
"You would think that the present crisis would have spurred ministers
and supervisors to find better ways of working together but I'm
afraid the crisis has had the opposite effect," he said.
As an example of the lack of communication between member states, he
said several EU finance ministers had told him they only learned
about problems in foreign-owned banks with branches in their country
through the newspapers.
The commission proposals also envisage that the three authorities
would be overseen by a steering group to prevent an overlap in their
work, a provision not contained in the Larosiere report.
Risk council
While less contentious, the second main proposal contained in the
commission's communication, the setting up of a European systemic
risk council, is also likely to meet with some resistance.
The new body that would monitor risk levels in the European economy
as a whole and issue risk warnings when necessary is to be chaired by
the president of the European central bank, something the UK feels
nervous about as a non-eurozone country.
One possible solution is the election of a vice-chair from a non-euro
state to allay fears they would not be represented.
The risk council's board would also contain the 27 national central
bankers, a member of the European commission and the three
chairpersons from proposed financial authorities.
Economy commissioner Joaquin Almunia said the risk council would help
to eradicate the "boom and bust cycles that are the cause of the
crisis", but added the proposed body would only be effective if
member states provided it with the necessary information to carry out
accurate analysis.
Warnings to member states would be followed up through an "act or
explain" mechanism, designed to increase peer pressure on countries
unwilling to make changes.
As a whole, the new plans constitute a major part of the commission's
long-term response to the financial crisis and is likely to be
something Barroso will hold up as an achievement under this current
term as he looks for a second at the June European council.
However, securing agreement on the new proposals at the June meeting
of EU leaders could yet prove problematic.
Thursday, 28 May 2009
TELEGRAPH 28.5.09
Europe tightens regulatory noose on City
The European Commission has seized on the financial crisis to bring
the City under closer EU control and clip the wings of Britain's
Financial Services Authority, unveiling far-reaching plans for a new
EU regulatory machinery with binding powers.
By Ambrose Evans-Pritchard
EU OBSERVER 28.5.09
Capitals fear commission finance proposals threaten national regulators
ANDREW WILLIS
BRUSSELS – Several EU member states have reacted with concern to
long-awaited proposals on financial regulation that were published by
the European Commission on Wednesday (27 May), fearing the role of
national regulators could be undermined.
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