Britain will not be able to stop EU ministers ganging up to impose damaging new rules on City of London

By Tim Montgomerie

A new report from Open Europe exposes the risk to the supremacy of Britain's financial services industry by a transfer of regulatory powerto the EU:

1. Broad EU powers: "The new European supervisors will be granted binding powers over national regulators in seven broad areas and will be given the mandate to interpret, apply and enforce provisions in over 20 separate EU laws."
2. EU powers likely to grow over time: "The supervisors are also likely to become more powerful over time, with several proposals already in the pipeline to extend their powers. The Commission and the European Parliament have also vowed to create an EU-based resolution fund for banks “in the longer term”, although that has so far been resisted by member states."
3. Britain won't be able to block anti-City measures: "Crucially, the voting structure within the supervisors is heavily biased against the UK. Most decisions will be taken by simple majority, meaning that the UK would have the exact same voting strength as all other member states despite being home to the bulk of the EU’s financial services industry. This would give the UK highly limited ability to block measures it disagrees with."
4. Regulatory confusion: "In many areas, splitting key supervisory powers between national and EU regulators risks creating more, not less, confusion about who exactly is responsible for overseeing the financial markets, who makes decisions and, crucially, where accountability lies. Ambiguity over where ultimate responsibility lies has often been identified as one of the key failures in the UK’s ‘tripartite’ regulatory system."

In today's City AM Allister Heath forecasts a future where EU ministers gang up to pass rules that damage London's pre-eminent position as Europe's financial centre:

"One of the problems with Gordon Brown’s idiotic tripartite regulatory system was that powers and responsibility were divided; it is absurd, therefore, that the coalition is willing to sign up to a similarly fudged solution on a European level. Nobody will be in charge. Worse, EU regulators will take decisions but it will be national taxpayers, not Brussels, that foot the bill. Countries won’t have a veto over decisions by the supervisors – they will only be able to appeal those with a “significant or material” impact on public spending. But supervisors’ decisions will only be overturnable by a majority vote in the Council of Ministers. So one can easily imagine everybody ganging up on the UK to punish the dreaded City."

George Osborne, who travels to Brussels today to approve the EU plans, insists the UK will still control day-to-day financial supervision.

> A PDF of the full report can be downloaded here.