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EU finance chiefs battle to overhaul bank rules
London resists efforts to enforce tighter oversight under direction of ECB
April 6, 2009
By Leigh Thomas
JUST days after the landmark Group of 20 (G20) summit on the global economy, European finance chiefs struggled on Saturday to put into practice promises to overhaul the embattled financial sector.
Efforts by EU finance ministers and central bankers to
push for tighter European oversight of the financial sector ran into stiff resistance mainly from Britain, eager to protect its vast banking industry.
International unity on tightening financial regulation, much vaunted at last Thursday’s G20 summit in London,
was also put to the test, with the European ministers deeply troubled at a meeting in Prague over a recent US move to relax accounting standards.
The European Commission promised it would lay out a
draft plan by mid-May for a European systemic risk council that would likely be led by the European Central Bank (ECB).
EU leaders would decide on an outline in June, and rules could be tabled by the end of the year.
The EU ministers’ new drive to improve Europe’s hodge-podge of supervisory bodies overseeing their financial sector was clouded by UK reservations about just how far the shake-up should go.
The ministers broadly agreed to push ahead with recommendations from a high-level panel headed by former International Monetary Fund chief Jacques de La Rosiere, which has called for a new early warning watchdog that would be chaired by the ECB.
French Finance Minister Christine Lagarde said Britain,
which does not use the euro and has its own central bank, had reservations about a group headed by the ECB, “as if the ECB were only a euro zone body.
“We have to find a joint solution because we can’t leave
London out of the system. London’s role in finance is too big.”
ECB chief Jean-Claude Trichet also sought to allay UK
concerns, insisting all EU central banks would have their say at the new risk watchdog.
“I insisted on … the fact that the new risk council would not only be the euro system but the system of all the European central banks … including those that are not members of the euro zone,” he said.
There were reservations among other countries about
whether planned centralised networks of supervisors that will oversee individual banks should have the authority to hand down binding orders.
Concerned about a new gulf opening up between Europe
and the US, the ministers called for their accounting
norms to be relaxed in line with recent US moves to give
banks more breathing room.
Under pressure from Congress, the US Financial Accounting Standards Board voted on Thursday to modify the “mark-to-market” accounting standard, which has been blamed by some for worsening
the global financial crisis.
The changes allow banks to hold some toxic assets, to give them more time to recover where financial markets are frozen, rather than regularly marking their prices down to depressed market prices.
“These changes could result in a significant divergence of
international accounting practice for financial instruments,” the ministers noted in a joint statement after the meeting.
They called on the standard bearer for Europe, the London based International Accounting Standards Board, to work with its US counterpart “with the aim of achieving equivalent treatment” for European banks.
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