EU finance law: Osborne claims that EU stance would make him look ‘an idiot’

EU finance law: Osborne claims that EU stance would make him look ‘an idiot’

UK Chancellor George Osborne has been praised by some EU lawyers and analysts for his stance on a new 700-page draft finance law which is currently being negotiated in Brussels.

EU finance ministers sat well into the night on Wednesday and into Thursday morning to discuss the proposals which are aimed at implementing globally agreed ‘Basel III’ capital requirements for European banks.

The sticking point for Mr Osborne concerned UK proposals which would allow individual nations to impose stricter capital requirements on banks on a case-by-case basis, without the need to seek approval from EU decision-makers.

Such a requirement is in keeping with the ‘Basel III’ rules, but is contrary to the views of many EU nations, who are hoping to implement a more relaxed regime across Europe. Mr Osborne’s stance has been backed by Poland, Sweden and Spain.

Mr Osborne’s tough stance was backed by Sven Giegold, a German member of the EU Parliament’s economic and monetary affairs committee.

“He is right. If you have relatively weak capital requirements, the consequence of this is that countries such as the UK will demand an opt-out.”

However, not all the diplomats present were complimentary, with many believing that Mr Osborne had come to the talks with a strategy to spoil the agreement.

With negotiations failed, finance ministers will now reconvene on 15 May for a fresh attempt at ending the deadlock.

The UK believes its position is justified as it is taxpayers who are expected to bail out banks when they go wrong, and it should therefore be up to individual governments to determine capital standards for individual banks based on their appreciation of the relative risk of a bank failing.

Karel Lannoo is chief executive of the Centre for European Policy Studies.

“They certainly have a point,” he said of the UK position.

“There has been a watering down of Basel. There was a clear demand for a leverage ratio, and what we have now is a promise to do something by 2018,” he added.

The EU proposals will benefit French and German banks, as it allows for a more obscure ‘risk weighting’ of assets, rather than the purer ‘leverage ratio’ which is based solely on balance sheet numbers.

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