UK lawmakers backs EU financial reforms, bemoan 'diminishing' influence
By Benjamin Fox
Most of the EU’s raft of post-crisis financial sector reforms were “necessary and proportionate” and would have been put in place via national law if the EU had not legislated, according to a new UK parliament report.
The ‘Post-crisis EU financial regulatory framework' report published on Monday (2 February) by the House of Lords EU committee gave broad backing for most of the EU’s financial sector reforms but bemoaned what it described as the UK’s “diminishing” role in shaping legislation.
Join EUobserver today
Get the EU news that really matters
Instant access to all articles — and 20 years of archives. 14-day free trial.
Choose your plan
... or subscribe as a group
Already a member?
In the wake of the 2008-9 financial sector crisis, the EU institutions produced a swathe of new financial regulation, totalling 41 legislative proposals, in addition to the bloc’s ambitious banking union framework which was concluded just before the 2014 European elections.
Despite perceptions of a UK being repeatedly over-ruled on financial sector regulation, the Cameron government was only outvoted on one file in the last legislative term - the latest version of the directive on bank capital requirements - which it opposed because of the inclusion of further restrictions on bonus pay.
It also opposed plans for an EU-wide financial transactions tax, which was then taken on by 11 members of the bloc. However, in both cases, London has filed legal actions against the European Commission.
“The most flawed of the legislative proposals were the result of political pressure to take action and/or to make the financial sector pay for the crisis,” the Lords’ report notes, pointing to the capital requirements bill and laws governing investment fund managers, as well as the draft financial transactions tax.
“The bulk of the new regulatory framework was necessary and proportionate, and would have been implemented by the UK even if action had not been taken at the EU level.”
However, the committee warned that “the UK’s influence over the EU financial services agenda is diminishing”.
“We urge the government to do all it can to restore the influence the UK once had in Brussels, and to keep our place at the front and centre of the debate," the report stated, adding that “the City of London is a prized asset not only for the UK but for the EU as a whole. Yet the UK, for all its expertise, risks being side-lined."
Meanwhile, the report called for the EU’s three supervisory agencies for markets, insurance and banking to be given more powers, commenting that despite having been “responsible for much good work… they are hampered by several fundamental weaknesses, including a lack of authority, independence, resources and influence over the legislative process.”
London remains the EU’s largest financial sector hub and City insiders were relieved when the UK’s new commissioner Jonathan Hill was given the financial services portfolio.
The centre-piece of Hill’s stint as financial services chief is expected to be a blueprint to harmonise the EU’s capital markets in a bid to reduce the reliance of Europe's businesses on bank lending.
The EU executive wants to move away from a model where European firms rely on banks for 80 percent of business finance, and follow the example set in the US where companies get five times as much funding from capital markets as their EU counterparts.
Last week Hill said that a Commission ideas paper would be launched “in a few weeks’ time” before the EU executive puts together an “action plan” included possible legislation in the autumn.