A European Union plan to set up watchdogs to supervise banks and spot threats to the economy could face delays after Britain voiced concerns on Tuesday and warned negotiations on the law could end in deadlock.
Sweden, which holds the EU presidency until the end of the year, is trying at a meeting of EU finance ministers in Luxembourg to secure agreement to set up the new super-watchdogs as soon as next year.
But Britain is worried the supervisors — who can overrule regulators such as the Financial Services Authority or national governments — could ultimately order taxpayers to spend money, beefing up a bank's capital cushion, for example.
"Today must be about implementing the June deal," said a senior British treasury official, referring to an outline agreement among EU leaders. "Any attempt to unpick or go further may just cause deadlock.
"A central plank of the June agreement was the respect for fiscal sovereignty reflecting the impact on national taxpayers of supervisory decisions," he said. "This fundamental principle should be applied to the entirety of the legislation."
The European Commission, the 27-country bloc's executive, unveiled its blueprint for an overhaul of the way banks and financial markets are policed last month. It is a central pillar for new rules designed to prevent a repeat of the global economic crisis.
The Commission plans to create a banking super-watchdog, with power to overrule member states, and a pan-European supervisor that would warn of early signs of crisis.
Britain, which part-owns some of the country's biggest banks after saving them from collapse, is concerned the new watchdogs could order it, for example, to inject more money to improve lenders' balance sheets to European standards.
Parliamentarians say the chances of the powers of the new supervisors being watered down are slim. But Britain, fighting to keep control over the centre-piece of its economy, the City of London, could delay their introduction.
There is widespread scepticism in London about the new financial rules which many people in Britain see as a German-Franco attempt to undermine Europe's financial capital.
The new laws will give more say to European institutions. The risk board, for example, which would be staffed by the European Central Bank and based in the German city of Frankfurt, is likely to have wide-ranging powers.
