The UK has the largest European economy outside of the 17 member Eurozone bloc. It is also the largest financial hub within the EU. Clearly, any meaningful changes to the way that the European financial sector is supervised and regulated would have to have the blessing of the UK.
In an attempt to be wise after the event and prevent the burden of a future financial meltdown falling on the European tax payer, the leaders of the EU are trying to put reforms of the banking sector in place by the end of 2014.
The French Finance Minister, Pierre Moscovici, met with his UK counterpart, George Osborne, in London and stated that the UK and France are in broad agreement over plans for the European Central Bank (ECB) to supervise all banks within the Eurozone. He insisted that the UK will be involved in the decision-making process, despite the fact that it remains outside the bloc.
The Franco-British position is at odds with that of Germany in that the Germans believe ECB supervision should only extend to major banks rather than the 6000 banks that populate the Eurozone. The authority of the ECB would be at a higher level than the national banks (such as the Bank of England) which currently regulate matters at the sovereign level.
Germany is pressing for closer fiscal unity within the Eurozone (a position the UK is happy with just so long as it doesn’t clip their own wings), so logic dictates that they would have to adopt the Franco-British position. Ultimately, the same rules would have to apply to banking institutions across the EU to avoid a two-speed system.
Mr Moscovici said that both France and the UK would like to see the new ECB supervisory system implemented quickly with the outline in place before the end of this year. Ultimately, the plan must be agreed by all 27 states making up the wider European Union.