The devil will be in the detail, but this agreement on common bank supervision within the Eurozone appears to be a positive step towards tackling the area’s problems, while also maintaining the interests of countries like the UK and Sweden outside the banking union.
It is, of course, only the first step and there remain a number of unanswered questions. But the deal seems to be good news for both Europe and the UK. A key outcome is that voting rights in the European Banking Authority will be restructured to ensure that the Eurozone bloc cannot dictate the agenda on technical standards to those outside. The agreement’s non-discrimination element is a positive signal that will hopefully continue to inform the direction of travel during discussions.
Significantly, this also demonstrates that UK politicians and civil servants can play a vital role in shaping the European debate by engaging with other countries and building alliances. It is crucial that policymakers continue to openly and loudly make the case for maintaining a genuinely level playing field across the single market, as part of efforts to enhance financial stability within the Eurozone.
As further steps are taken towards a fully-fledged banking union, it will be necessary to address some specific areas of uncertainty. Greater clarity needs to be provided on the timetable for implementation, as well as on the rules of engagement for the European Central Bank when it comes to the approximately 5,800 smaller banks that will remain under national supervision.
And there are other bigger political challenges that remain on the horizon, especially as moves to provide a deposit guarantee for Eurozone banks and a common resolution framework are eventually taken to complete the three-pillar banking union project.
We can take confidence, however, from the proactive engagement demonstrated by the government last week. This is important not just for London – given its position as Europe’s financial capital – but for the UK as a whole, given that the majority of financial services jobs are actually located outside the capital. Decisions taken in Brussels have a direct impact on the industry as a whole, regardless of whether you are in Edinburgh, Manchester or Norwich.
So while we may be on the outside looking in when it comes to the banking union, it is reassuring to see that we are not powerless to influence the European debate.
Mark Boleat is policy chairman at the City of London Corporation.