Darling cedes final say on bank bailouts to Europe

UK's 'fiscal responsibility' can be over-ridden, text of European Union deal reveals

The Government has conceded one of its vital "red lines" in the agreement to set up new pan-European financial supervisory bodies – and lost its veto on paying for any future European banking rescue.

British ministers have long insisted that "fiscal responsibility" for European banking rescues should be "aligned" with national supervision, because national governments usually pay for such episodes.

Yet the amended text of the latest EU agreement, released yesterday, offers much "wriggle room" for a determined European regulator to defy a national government. The text states that disputes over paying for rescues will be reached by simple majority voting, thus depriving the UK of a final right of veto.

Although the text of the agreement reached at Wednesday's meeting of European finance ministers, including the Chancellor Alistair Darling, states boldly that the new overarching European supervisory authority "shall ensure that no decision... impinges in any way on the fiscal responsibilities of member states", it also offers only limited resistance in cases where a national government and the European regulator clash.

A series of appeals are set out involving delays of up to three months, itself an impractical procedure during financial crisis, and requires both sides to present arguments. However, New Article 23 of the document leaves open the possibility that a majority of EU finance ministers and the EU regulator could force the UK taxpayer to foot the bill for the bailout of a European institution.

Angela Knight, of the British Bankers' Association, expressed hostility, saying: "We are keen to see more harmonious supervision and to work towards a common rule book. But if a national government has to stand behind a financial institution then that has to be a national responsibility."

Earlier this year, Mr Darling said: "Responsibility for managing the resolution of financial crises – including fiscal support – remains an important consideration in designing supervisory and regulatory structures. Supervisory authority needs to be aligned with fiscal responsibility."

Yet the new directive also states that the European Banking Authority "shall actively facilitate and, where deemed necessary, coordinate any actions undertaken by the relevant national competent supervisory authorities" in the case of "adverse developments which may seriously jeopardise the orderly functioning and integrity of financial markets or the stability of the financial system in the European Union". The loss of a final say over European banking bailouts comes at the end of a difficult week, in which the reappointment of a Frenchman to the important position of European commissioner for the internal market prompted the French President Nicholas Sarkozy to declare: "I want the world to see the victory of the European model, which has nothing to do with the excesses of financial capitalism".

Three bodies will come into force, based in London, Paris and Frankfurt: the advisory European Systemic Risk Board, on which the Governor of the Bank of England, Mervyn King, could play a key role; the European Banking Authority; the European Insurance and Occupational Pensions Authority; and the European Securities and Markets Authority.

National supervisors such as the FSA will retain day-to-day oversight; but the European bodies will seek "harmonisation", "ensure a common supervisory culture and consistent supervisory practices and "ensure a coordinated response in crisis situations". Many in London fear heavier regulation will push businesses away.

Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Financial Controller

£45 - £55k DOE: Guru Careers: A Financial Controller is required to join a suc...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£12500 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Recruitment Genius: Sales Adviser - OTE £24,500

£22500 - £24500 per annum: Recruitment Genius: Inbound and outbound calls with...

Recruitment Genius: Business Development Executive / Sales - OTE £40,000

£18000 - £40000 per annum: Recruitment Genius: This fast growing Insurance Bro...

Day In a Page

Mullah Omar, creator of the Taliban, is dead... for the fourth time

Mullah Omar, creator of the Taliban, is dead... again

I was once told that intelligence services declare their enemies dead to provoke them into popping up their heads and revealing their location, says Robert Fisk
Margaret Attwood on climate change: 'Time is running out for our fragile, Goldilocks planet'

Margaret Attwood on climate change

The author looks back on what she wrote about oil in 2009, and reflects on how the conversation has changed in a mere six years
New Dr Seuss manuscript discovered: What Pet Should I Get? goes on sale this week

New Dr Seuss manuscript discovered

What Pet Should I Get? goes on sale this week
Oculus Rift and the lonely cartoon hedgehog who could become the first ever virtual reality movie star

The cartoon hedgehog leading the way into a whole new reality

Virtual reality is the 'next chapter' of entertainment. Tim Walker gives it a try
Ants have unique ability to switch between individual and collective action, says study

Secrets of ants' teamwork revealed

The insects have an almost unique ability to switch between individual and collective action
Donovan interview: The singer is releasing a greatest hits album to mark his 50th year in folk

Donovan marks his 50th year in folk

The singer tells Nick Duerden about receiving death threats, why the world is 'mentally ill', and how he can write a song about anything, from ecology to crumpets
Let's Race simulator: Ultra-realistic technology recreates thrill of the Formula One circuit

Simulator recreates thrill of F1 circuit

Rory Buckeridge gets behind the wheel and explains how it works
Twitter accused of 'Facebookisation' over plans to overhaul reverse-chronological timeline

Twitter accused of 'Facebookisation'

Facebook exasperates its users by deciding which posts they can and can’t see. So why has Twitter announced plans to do the same?
Jane Birkin asks Hermès to rename bag - but what else could the fashion house call it?

Jane Birkin asks Hermès to rename bag

The star was shocked by a Peta investigation into the exotic skins trade
10 best waterproof mascaras

Whatever the weather: 10 best waterproof mascaras

We found lash-enhancing beauties that won’t budge no matter what you throw at them
Diego Costa biography: Chelsea striker's route to the top - from those who shared his journey

Diego Costa: I go to war. You come with me...

Chelsea's rampaging striker had to fight his way from a poor city in Brazil to life at the top of the Premier League. A new book speaks to those who shared his journey
Ashes 2015: England show the mettle to strike back hard in third Test

England show the mettle to strike back hard in third Test

The biggest problem facing them in Birmingham was the recovery of the zeitgeist that drained so quickly under the weight of Australian runs at Lord's, says Kevin Garside
Women's Open 2015: Charley Hull - 'I know I'm a good golfer but I'm also just a person'

Charley Hull: 'I know I'm a good golfer but I'm also just a person'

British teen keeps her feet on ground ahead of Women's Open
Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkish President Erdogan could benefit politically from the targeting of the PKK, says Patrick Cockburn
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn or a return to a Labour government

Our choice is years of Tory rule under Corbyn or a return to a Labour government

Yvette Cooper urged Labour members to 'get serious' about the next general election rather than become 'a protest movement'