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November 17, 2009

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Britain urged to veto EU plans

THE British government has been urged to veto the European Union's proposals to reform financial regulation.

The House of Commons Treasury Committee said it was concerned about some of the details of the proposed regulation and urged the EU to slow down and think again.

It said the proposals had been put together too hastily and would undermine the nation's sovereignty.

"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 hoped to get the rules confirmed on December 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 was no guarantee the board's steering committee would include members from outside the eurozone, such as Britain and Sweden.

"We insist that UK ministers do not agree to any of these provisions until the fiscal sovereignty of the UK is protected by a veto," the report said.

The panel noted that Paul Myners, the Treasury's financial services secretary, had testified on November 4 that he was prepared to use a veto to protect the fiscal position of member states.

Meanwhile, Paul Tucker, deputy governor of the Bank of England, said new regulations should ensure that the costs of supporting banks in crisis should be shouldered by the industry, not by taxpayers.

Tucker told a crisis management conference in Brussels that the big issue was "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."

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.


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