The rationale for an EU banking union is clear: if Eurozone bank bailout costs are socialised, then bank regulation must be centralised. But this is the wrong approach. Instead, we should focus on ensuring that banks can fail safely, without bailouts. Roland Vaubel explained the dangers of a banking union in yesterday’s City A.M. Regulators at EU level will be captured by the industry given the lack of democratic accountability. A banking union prevents member states from developing regulatory structures that are appropriate for their own circumstances: Greece and Germany have very different financial systems. EU structures are also amenable to exploitation by countries that want to raise their rivals’ costs. We will see regulatory costs and restrictive practices imposed on Britain through the back door by EU institutions that are unaware of the benefits of finance.
Philip Booth is programme director at the Institute of Economic Affairs.
The devil will be in the detail, but this agreement appears to be a positive step towards tackling the Eurozone’s problems while maintaining the interests of countries outside the banking union. The issue of voting rights in the European Banking Authority is of critical importance, and it is vital that a genuinely level playing field is preserved across the single market. There remain a number of unanswered questions, but this deal seems to be good news for both Europe and London. As Europe’s financial capital, London is not simply an interested bystander in this debate. We are home to the most complex parts of the euro area banking system; for instance banks in the UK hold around £1.4 trillion in euro-denominated assets. That is why it is crucial we continue working with our European partners to shape a positive outcome that delivers financial stability, while protecting the integrity of the single market.
Mark Boleat is policy chairman at the City of London Corporation.