EU plans could damage London’s financial reputation

The Commons Treasury Committee has launched an urgent inquiry over fears that European Union plans for financial regulation and supervision could damage London's pre-eminent role as a world financial centre.

Labour chairman John McFall said the proposals will set the shape of the system for many years to come.

"It is regrettable there is so little time to consider them," he said.

His committee has called for evidence on the overall impact of the proposals for a European Systemic Risk Board and three European supervisory bodies: a European Banking Authority, a European Insurance and Occupational Pensions Authority and a European Securities and Markets Authority.

It is seeking views in particular on:

* the interaction between EU, national and international regulatory and supervisory arrangements;

* the composition and internal structures of the supervisory authorities and the ESRB;

* whether the powers proposed for these bodies are appropriate;

* the proposals' effect on the competitiveness of the European financial industry in general and the City of London in particular; and

* the timescale for agreeing the legislation.

McFall said it was important to get the structure right, adding: "That means all stakeholders need time to study the detail.

"We have launched this urgent inquiry to make sure that those with any concerns can raise them with the committee before the ECOFIN meeting on 2 December."

Jacques de Larosiere, a former managing director of the IMF, chaired a group which proposed a new framework for European supervision involving the establishment of a European Systemic Rick Council, chaired by the president of the ECB, with its membership including, among others, representatives from the National Central Banks of all 27 member states to issue risk-warnings and recommendations to policy makers and supervisors, a greater role for the EU in micro-prudential supervision, primarily through a European System of Financial Supervision with a European Banking Authority, a European Insurance Authority and a European Securities Authority, and a college of supervisors for the supervision of cross-border banks within the EU.