U.K. Chancellor Alistair Darling has blocked an attempt by Sweden, which currently holds the E.U. presidency, to reach an agreement for the creation of a regulatory body for the banking sector within the European Union's 27 member states.
The creation of the body, and another body which would be tasked with monitoring conditions within the wider economy for signs of any impending crisis, was rejected by Mr Darling on the basis that it could, in the words of the
Telegraph, threaten "sovereign control of financial supervision" and allow the E.U. to start "dictating an element of Britain's spending and budgetary policy".
It is feared that national regulatory bodies, such as the Financial Services Authority in the U.K, could find themselves powerless if an E.U. "super-regulator" was established.
There are reportedly concerns within the U.K. financial industry that the creation of an E.U regulator is a joint effort by France and Germany to weaken London's status as the financial capital of Europe.
With regard to such concerns
Reuters notes that the proposed "risk board", the
Telegraph confirms it would be known as the European Systemic Risk Council, would be based in Germany's financial capital Frankfurt and staffed by the European Central Bank.
Sweden, which put forward its proposals for the banking watchdog and the "risk board" at a meeting of E.U finance ministers in Luxembourg on Tuesday, is said only to be trying at present to secure agreement to actually establish one or both of the new regulatory bodies and not necessarily thrash out the exact details of the bodies' responsibilities.
Despite the U.K. bringing a temporary halt to the establishment of the regulatory bodies the Treasury has indicated that it does wish to see the bodies created, but they must not interfere with national sovereignty over fiscal matters.
An unnamed Treasury official explained:
A central plank of the June agreement [among EU leaders on supervision] was the respect for fiscal sovereignty reflecting the impact on national taxpayers of supervisory decisions. This fundamental principle should be applied to the entirety of the legislation
Reuters quotes Alistair Darling as saying something very similar in relation to the U.K.'s position on the matter. The Chancellor said:
There are a number of proposals which we can't accept. This is work in progress. There are still a couple of difficult issues. If we can, we want to get it resolved by the end of the year.
The bottom line for us is that we couldn't have a situation where a European supervisor could make an order to an institution in our country which could have fiscal consequences
