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Home > Regulation > EU Directives

EU moves for banking stability won’t benefit UK

A banking union might provide a solid framework for stability, but it won’t help the UK, academics and industry commentators have warned.

By Simoney Girard | Published Sep 14, 2012 | comments

Speaking after Germany backed proposals from Brussels for a banking union, Dr Enrique Schroth of the Cass Business School, said: “Being the most diversified in the EU, UK banks could get the least benefit from the liquidity guarantees provided by the European regulator while still being hurt from the implied moral hazard risks.

“Unfortunately, little is known about the relative size of these costs and benefits. What we do know is that systemic crises are extremely costly, and any mechanism aiming at avoiding runs, and solving cross-border insolvencies quickly is worth serious consideration.”

Rebecca Harms, Green Party representative to the European Commission, said: “We would caution on the need to provide democratic oversight and to prevent conflicts of interests with the existing competences of the European Central Bank.”

If the ECB takes on the role of banking supervisor, it must ensure there is transparency, accountability, budgetary control and conflicts of interest with its existing roles.

She added: “Proper supervision of all European banks, with a view to preventing a recurrence of this and to strengthening the real economy, must be a central element of the new European banking union.”

Paul Edmondson, spokesman for CMS Cameron McKenna, said: “The financial markets will welcome these measures to support the Euro but the evermore Byzantine complexity of EU voting mechanisms will not provide the City or UK with the protection they need.”

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