A panel of European officials would be given sweeping new powers to police the financial sector across the continent but also in the City of London, reports The Telegraph.
They would be given “full decision making powers” to impose EU law and to arbitrate disputes between Britain and the eurozone over the risks posed by British banks, according to the proposals being tabled on Wednesday at the European Commission. Decisions taken by the powerful body would be automatically binding unless Britain was able to win the unlikely backing of a majority and overturn them.
Rulings by the panel could create huge costs for the British government and banks if they were ordered to bail out a struggling institution, contribute to cross-border bail-out funds, or allow the EU to rule over breaches of European law.
The moves stem from proposals for a eurozone “banking union”. The radical new EC blueprint for banking regulation at the EU level is focused on giving the European Central Bank new powers to supervise the eurozone’s banks, in order to shore up struggling financial institutions in southern European countries such as Spain.
But the ECB’s new role would see the existing European Banking Authority (EBA) – the current pan-European bank regulator that has its headquarters in London – being radically overhauled and strengthened. Its panel of European officials would be given new powers to stamp its authority on potential disputes between both eurozone and non-eurozone countries, including Britain.
Under the proposals, the newly “independent panel” of officials would have full and binding powers to impose EU law and to arbitrate disagreements between Britain and the eurozone over how the City is regulated. The proposals will “confer full decision-making powers to the independent panel on breaches of EU law and settlement of disagreements”, the plans outline.
Under current rules the EBA panel’s decisions are proposed for “final adoption” only after support from a majority of all 27 EU countries. But under the new EC proposal this procedure is reversed. If agreed, the panel’s decisions will be implemented automatically unless a specially constructed majority vote against it, which must include three countries that are inside the “banking union” and three that are outside it. It means that in a dispute Britain would have to win over members of the eurozone bloc.
On Tuesday night Douglas Carswell, the Conservative MP for Clacton, accused the Government of failing to honour its promises on the eurozone. “The Government has assured us that Britain will not be dragged into the eurozone’s economic arrangements. These proposals show that the government’s policy has been a catastrophic failure,” he said.
Bill Cash, the Tory chairman of the House of Commons European scrutiny committee, said: “This must be vetoed as an imperative. We have reached the endgame. It is imperative that there is a vote on this in the House of Commons.”
Whitehall sources said that the Government supported giving the ECB new “centralised” powers to supervise eurozone banks as “an important contribution” to tackling the euro’s crisis, especially in the wake of the looming Spanish banking bail-out.
“The challenge for negotiations is to get the single market EBA right and the commission’s proposals on the voting mechanism and scope of decisions is not right yet. We’ve been in similar place before and got a good result,” said a source.