LONDON (Reuters) - Britain would turn to the European Union’s top court if plans for a euro zone banking union harm the country’s financial sector or the wider single market, a government minister said on Tuesday.
EU leaders meet in December to formally vote on making the European Central Bank supervisor for the euro zone’s 6,000 banks from 2013.
Unanimity among all 27 EU member countries is needed and intense behind-the-scenes talks continue, in particular over the rights of the 10 countries outside the euro zone.
The “outs” like Britain - the largest financial centre in Europe - worry the single currency countries will have an inbuilt majority to push through banking rules to their liking that all EU states would have to apply.
“We should be vigorous in making use of the European Court of Justice to defend the positions that we have,” Britain’s financial services minister Greg Clark told a Lords committee looking at the banking union plans.
Britain has already gone to the ECJ to challenge an ECB policy requiring clearing houses that handle large amounts of euro-denominated securities should be based in the euro area.
The Bank of England becomes Britain’s top banking watchdog from April and Britain wants it to be on an equal footing with the ECB.
“We would have some concerns if the ECB were to acquire greater powers than our own regulator has,” Clark said.
But some parliamentarians were sceptical, saying that as “Britain may not be flavour of the month in Brussels” it may be impossible to get watertight safeguards.
Clark said Britain’s national interests were not being threatened and it had allies with the same concerns.
Nikhil Rathi, a treasury official advising Clark, said there was an understanding in the European Union that there was “some way to go to make sure non-participants’ interests are properly taken into account”.
The European Commission ultimately has the power to adopt binding rules on banks and Rathi said the EU executive might be the best way to ensure common rules are approved if regulators clashed.
Clark urged the parliamentarians to avoid assuming Britain was always on the back foot and could not take a leading and assertive role in financial services.
The banking union would not be done and dusted in December but would be a dynamic project as some “out” countries joined, altering how it worked.
“This is going to require week-by-week, month-by-month engagement,” Clark said.
Reporting by Huw Jones; Editing by Jon Boyle