Without proper oversight, such a union could threaten the single market, the peers warned.
“Tomorrow the government must go into battle at the critical European Summit to fight for the City of London to retain its premier position as the centre of EU financial services,” said committee chairman Lord Harrison. “It is vital the UK government gets the negotiation right so that the banking union does not undermine the single market as a whole, and the single market in financial services in particular.”
This came after Sweden yesterday said it would, like the UK, stay outside any banking union, potentially turning the Scandinavian country – the second biggest EU banking centre outside the Eurozone, according to the Global Financial Centres index 2011 – into a key British ally on financial rules.
The Lords committee wants the government to insist that both national parliaments and the EU parliament had powers to oversee the European Central Bank’s running of the overall union. They also called for separation between ECB staff running monetary policy and those overseeing banks.
The peers also wanted the government to stress the distinction between the European Banking Association and the ECB – with the former setting the rules and the latter enforcing them.