Telegraph 28 Maggio 2009

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.

"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?"

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."

By Ambrose Evans-Pritchard

Source >  Telegraph | May 27