Commenting, Lord Harrison, Chairman of the House of Lords EU Sub-Committee on Economic and Financial Affairs, said:
“The Government’s confidence that the City will not suffer because of the UK’s choice to remain outside banking union could prove misplaced. The Government must do all they can to ensure that the UK’s pre-eminence is retained, not assume that it will always remain.”
The Committee set out a number of fundamental concerns with the banking union proposals as currently drafted. These include:
• As banking union participants move toward common positions on issues relating to the EU financial sector, the UK risks being marginalised. The Committee urge the Government to ensure that the status of the UK’s financial services industry will not be diminished as a result.
• The levels of financial integration proposed for Eurozone countries could threaten the integrity of the single market with significant implications for countries such as the UK who remain outside the banking union.
• Far stronger safeguards are needed to prevent a conflict of interest between the European Central Bank’s supervisory and monetary policy roles. The ECB must be held accountable for its supervisory role both to the European Parliament and national parliaments.
• The Committee regret that the proposals for a Single Supervisory Mechanism will not be complemented by a common deposit insurance scheme and a common resolution scheme because of German pressure. A viable banking union cannot be achieved without them.
The House of Lords EU Committee have written to the Financial Secretary to the Treasury, Rt Hon Greg Clark MP, setting out their concerns over the proposals for the creation of a European Banking Union. The Committee’s letter comes in the context of today’s meeting of European Finance Ministers and ahead of the European Summit scheduled for the 13-14 December where banking union will be discussed. Before that meeting the Committee will publish its report A European Banking Union but have written to Mr Clark today to ensure their position can inform the Government’s thinking ahead of the crucial European Summit.
Commenting, Lord Harrison said:
“We have written to the Minister to ensure the Government go into today’s meeting and next week’s European Summit aware of the strength of feeling in Parliament about the dangers for the UK that banking union could present. Whilst we support the principle of a European banking union, the consequences of banking union on the UK could be significant.
“The Government must get these negotiations right. Today’s meeting of Finance Ministers, and the European Summit on the 13-14 December will be a vital signpost for the future direction of the EU. The Government must take the risk to the UK and the single market seriously, and ensure that they secure a deal that is right for the City and right for the UK economy.”
The letter has been released ahead of publication of the Committee's final report on banking union. The final report is expected to be published ahead of the European Summit on 13 December.