Heavy EU regulation is to blame for a large portion of the failings in the current financial crisis.
The UK’s implementation of the EU Capital Adequacy Directive within the framework of the Basel II Agreement, does underpin the downgraded value of banks, making the financial crisis worse than it really is. Richard North has done a good job of explaining this phenomenon in terms of how David Cameron promised at his Party Conference that he would like to get Britain out of this mess (without talking about EU legislation). Since the UK has surrendered control over this area of legislation for the financial industry, it is difficult to see how this situation is going to be reversed – will Cameron or anyone on the Tory frontbench talk about European governance of the financial industry, as is necessary for the reversal of this Government-assented problem.
Tim Congdon had already written on the Northern Rock crisis and how European legislation grossly hampered the UK’s ability to govern itself. He wrote for The European Journal back in July, explaining that Mervyn King, the Bank’s Governor, identified the interaction between ‘four pieces of legislation’ which had damaged the BoE’s exercise of the lender-of-last-resort function, including the Takeover Code, the Market Abuse Directive, the UK’s system of deposit insurance, and the lack of special legislation in the UK for failing banks. He proved that the European dimension of the Takeover Code and the Market Abuse Directive clearly jeopardized the abilty of the BoE to act in the national interest.
Update: Tim Congdon's original piece on Northern Rock is here.
