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
ebooks
ebooksA special investigation by Andy McSmith
Voices
An easy-peel potato; Dave Hax has come up with an ingenious method in food preparation
voicesDave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
News
i100
Arts and Entertainment
Jay Z has placed a bet on streaming being the future for music and videos
music
Arts and Entertainment
Festival-goers soak up the atmosphere at Glastonbury
music
News
Japan's population is projected to fall dramatically in the next 50 years (Wikimedia)
news
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

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

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own