Exposing the link between regulation and high politics

In my last two articles I discussed David Cameron’s use of the UK veto at the December 2011 European Council meeting and also the European Banking Authority chairman’s speech on the single European rule book.

In this article I will again touch on both issues by looking at a recent speech given by EU Commissioner for the Internal Market and Services, Michel Barnier. The speech was entitled Financial Regulation – a Review of 2011 and a Look Forward to 2012. So why is Mr Barnier’s speech of interest?

First, he gives a useful insight into the ‘official’ European view of the UK veto. While emphasising that he still believes that the UK’s future is still at the heart of Europe, he does argue that European leaders were right to reject the safeguards in financial services that the UK was asking for.

The reasoning behind this was on the basis that the safeguards would have reintroduced a certain amount of unanimity in decision-making in the single market. According to Mr Barnier, opening the door to unanimity on financial services would have meant similar demands in other sectors from other member states and this might have spelt the end of the single market.

Mr Barnier’s speech has been much debated in the press and I will not run through the analysis here except to say that all eyes will now be on negotiations in other policy areas.

Second, Mr Barnier made the point that while the single rule book is needed he accepted that this did not mean a one-size-fits-all approach to regulation and that some flexibility would be given to national supervisors.

This surprised me given that many of the rules now being adopted at the EU level are in the form of regulations which are directly applicable to member states. In addition to that it might be recalled that in the EBA chairman’s speech I previously discussed the concept of a single guidebook for supervisors was also mooted which was intended to reduce national flexibility even further by tackling the diverse range of EU supervisory approaches.

I have recently said that one of the key points to remember for this year is that there is a huge connection between the highly-technical regulatory debate that we are currently having and high politics. The above are, in my view, perfect examples.

Simon Lovegrove is a lawyer with the financial services team at Norton Rose