‘Single rule book’ for Europe’s banks

Telegraph
15.02.2011
By Alistair Osborne

Europe’s banks will be subject to more “top-down” regulation, with a single set of rules governing their oversight, according to the head of the European Union’s new banking authority.

Andrea Enria, chairman of the European Banking Authority (EBA), said the financial crisis demonstrated the problems inherent in a consensual approach to banking regulation across the EU.

“I think now it has to be a little bit more top-down,” Mr Enria said in a newspaper interview last night. “The ’single rule book’ is the true power. If we start having regulatory competition again, it will be havoc.”

Such muscle flexing by the EBA potentially puts the new body on a collision course with national regulators, such as Britain’s Financial Services Authority. They are likely to feel that their power is being undermined by the EBA.

Mr Enria said his priority would be to restore the credibility of bank stress-testing, which has been badly shaken since the financial crisis by the implosion of Ireland’s banking sector. Only four months after being given a green light by the Committee of European Banking Supervisors (CEBS), the Irish banking system collapsed.

A top-down approach from a powerful new EU body is certain to cause jitters in the City, however, over regulatory interference in the financial services sector.

The EBA, which comprises representatives of the EU’s 27 member states, has more power than the CEBS, being able to make decisions by majority vote. In a crisis it is able to over-rule national regulators – though its powers are limited when taxpayers’ money is at stake.

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