Contact: Owen Williams 020 7219 8659
LORDS EU COMMITTEE WRITE TO LORD MYNERS WITH CONCERNS ON EUROPEAN COMMISSION'S PLANS FOR EUROPEAN FINANCIAL SUPERVISION
The House of Lords EU Committee have today written to Lord Myners, the Financial Services Secretary, expressing their concerns with European Commission proposals for the reform of financial supervision in the EU. The Committee set out amendments the Government should aim to achieve in their negotiations on the proposals.
The Committee's most pressing concern is that under current proposals the European Supervisory Authorities (ESAs) would have the power to directly apply a decision to an individual institution if the national supervisory authority fails to implement an ESA decision. The Committee point out that as decisions in the ESA are reached by Qualified Majority Voting this could lead to decisions being applied to UK financial institutions without the FSA having the power to veto them.
The Committee argue that this situation would go against Lord Myners' assertion that day-to-day supervision should remain the responsibility of the national supervisor.
The Committee believe that decisions made by the ESA which would involve a direction to an individual financial institution within a member state must be reached only by unanimity and call on the Government to seek change to the proposals is achieved in forthcoming negotiations.
The Committee also address the creation of the European Systematic Risk Board. While they welcome the creation of the ESRB in principle, the Committee raise concerns that it could pressure individual Member States to conform to its own fiscal and economic policies. They call on Lord Myners to work to ensure the ESRB does not operate in this way. The Committee also express concern about the proposed structure of the ESRB, pointing out that its board will have 61 members, too many to achieve effective decision making in a crisis situation. The Committee expect that the United Kingdom as the largest financial centre in the EU would have permanent representation on the Steering Committee of the ESRB.
Commenting Baroness Cohen, Chairman of the House of Lords EU Sub-Committee on Economic and Financial Affairs, said:
"It is vital that national financial regulators have day-to-day responsibility for supervising financial institutions. This is not a function that should be farmed out to Brussels.
"To ensure the European Supervisory Authority does not take action against individual financial institutions in the UK without the FSA's backing we recommend that decisions of the ESA require unanimity among Member States for before being implemented and should not be based on qualified majority voting.
"It is also important that the European Systematic Risk Board does not pressure EU Member States to sacrifice their own fiscal and economic policies to meet EU goals.
"We are writing to Lord Myners to make our position clear on these issues and will be monitoring developments in Brussels to ensure the Government keep these important provisions at the forefront of their minds during future negotiations."
Notes to Editors
- The full text of the House of Lords European Union Committee's letter to Lord Myners and other information about the Lords EU Sub-Committee on Economic an Financial Affairs and International Trade is available here:
- The Committee are currently undertaking a detailed inquiry into the European Commission's Alternative Investment Fund Managers Directive. Following the letter to Lord Myners on proposals on financial supervision they will also be writing to him regarding EU proposals for regulating hedge funds. They plan to publish a full report on both issues in the New Year.
For further details or to request an interview with Baroness Cohen, please contact Owen Williams, Head of Press and Media, House of Lords on 020 7219 8659.