LONDON—British lawmakers on Monday urged their government to veto the European Union's proposals to reform financial regulation, saying they were put together too hastily and would undermine the nation's sovereignty.
The Treasury Committee, a bipartisan panel from the House of Commons, said it was concerned about some of the details of the proposed regulation and urged the EU to slow down and think again.
"There is still more unease about the speed with which it is hoped to agree them," the committee's report said, noting that the European presidency hopes to get the rules confirmed on Dec. 2.
"The timetable would be less worrying -- although still over hasty -- if the proposals were without controversy. However, even on a short examination we have found serious cause for concern," the committee said.
A key worry was whether the proposed European Systemic Risk Board would have the power to override national decisions.
The committee also expressed concern about the size of the proposed 61-member board and complained that there is no guarantee that the board's steering committee will include members from outside the eurozone such as Britain and Sweden.
"We insist that U.K. ministers do not agree to any of these provisions until the fiscal sovereignty of the U.K. is protected by a veto," the report said.
The panel noted that Paul Myners, the Treasury's financial services secretary, had testified on Nov. 4 that he was prepared to use a veto to protect the fiscal position of member states.
"Even though there is a consensus that reform of the European financial institutions is needed, that reform needs to be carefully established: it is better to be right than quick," the committee said.
Meanwhile, the deputy governor of the Bank of England said new regulations should insure that the costs of supporting banks in crisis should be shouldered by the industry, not by taxpayers.
Market discipline should be part of rescue planning, Paul Tucker told a crisis management conference in Brussels.
The big issue, he said, is "whether our community can find ways of distributing the costs of official sector support operations back to the system and its uninsured creditors rather than to the general taxpayer."
"If we can achieve that," Tucker said, "market discipline would be enhanced."
The regulatory system must compel banks to hold minimum stocks of high-quality liquidity, and banks which engage in riskier activity should pay more for their insurance, he said.
"We want to underline that banks will end up paying more to draw on the insurance line if they are overly reliant on illiquid, risky collateral implying that their balance sheet was overly exposed to liquidity risk," Tucker said. "These considerations have to be taken into account if central banks are to lend against very broad asset classes."
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On the Net:
Tucker's speech, http://www.bankofengland.co.uk/publications/news/2009/083.htm
