By Laura Noonan
LONDON Dec 13 London's financial centre heaved
a sigh of relief on Thursday after a landmark deal on Europe's
incipient banking union removed an immediate threat to 'the
City's' global position.
The text thrashed out by finance ministers overnight makes
the European Central Bank the euro zone's top banking regulator
but includes key concessions that guarantee the UK's influence
in pan-European banking policy and protect London's status as a
global financial centre.
It was agreed after a lengthy late-night debate and months
of intensive lobbying by the UK, with prominent figures
including London Mayor Boris Johnson coming out to bat for an
industry that employs 600,000 in the City financial district
alone and contributes 9.4 percent to the UK's 'gross value
added', a measure of an industry's contribution to the economy
less production costs.
"The safeguards we have secured protect Britain's interests
and the integrity of the European single market," UK Chancellor
George Osborne said after the deal was clinched.
One key concession is a change to the voting structure of
the European Banking Authority, which was set up two years ago
to coordinate the supervision of banks by regulators from across
the European Union so that countries not taking part in the
banking union cannot be steamrollered by the others.
The second is a clause preventing the ECB from
discriminating against any EU member state "as a venue for the
provision of banking or financial services in any currency".
Banque de France governor and ECB governing council member
Christian Noyer had effectively threatened to do just that
earlier this month, warning that London's status as the EU's
biggest financial centre would be at risk if the UK did not join
Europe's banking union.
"The UK has negotiated a very strong position," said Arjun
Singh-Muchelle, director for European Affairs at the British
"We don't see banking union as being a threat to the City.
If anything we think it will help by bringing stability in the
A paper from the UK's House of Lords European Union
Committee published earlier this week warned that London would
inevitably face a "degree of marginalisation" from opting out of
banking union and called on the UK authorities to do everything
necessary to protect London's position.
"We are pleased that they have come to a decision about the
European Banking Union but the devil is in the detail," Lyndon
Harrison, chairman of the House of Lords' Sub-Committee on
Economic and Financial Affairs, told Reuters on Thursday.
"My view would be, 'well done so far, but let's make
absolutely sure we've got it right'," he added, stressing that
the UK government should ensure that clauses to avoid the ECB's
governing council dictating wider policy were "watertight".
Tom Huertas, a partner with accountancy firm Ernst and Young
and former alternate chair of the EBA, said the changes to the
EBA voting structure were positive for opt-out countries.
"If confirmed by the European Parliament the solution would
help assure that non-euro zone countries such as the UK continue
to have a real voice in determining the rules to be written by
the European Banking Authority," he said.
The Confederation of British Industry, a business lobbying
organisation representing 240,000 UK companies, described the
deal as a "positive development" that would achieve greater
financial stability across Europe.
"A single market in financial services is critical and this
agreement has gone some way to allaying fears of it becoming
fractured," said the CBI's Director for Competitive Markets,
Andrew Gowers, spokesman for the Association for Financial
Markets in Europe, said Thursday night's agreement was a "big
step forward" which would enhance rather than distort the single
market for financial services.
"We think the safeguards [for non-participating countries]
are adequate," said Gowers. "We wanted to see a fair and
balanced way of reaching decisions, particularly on the European
Banking Authority ... We think this does that."
Gowers said the deal reached over night appeared to have
secured fairness, "provided that everyone operates in good
"There's always a danger one or other of the member states
will try to score points off London," he said.
Alexandria Carr, barrister for the London law firm Mayer,
also said the UK and its allies appeared to have secured
"important safeguards" to ensure the European Banking Authority
remained representative of all 27 countries in the EU.
"This will help ensure that the UK is not isolated, but time
will tell whether this division marks the genesis of a two-speed
EU with the participating countries moving towards an ever
closer union," she said.
Meanwhile Andrew Morris, managing director at Signature, a
unit of wealth manager Rowan Dartington, said the overnight news
was a "great headline and one that markets should have reacted