Financial Services Bill

That is probably a good point, and I hope that the relevant powers will listen to it. When Monsieur Barnier came to London a few weeks ago, he defended his legislative programme as necessary to creating a single market. If it would create a single market, most Members on both sides of the House would wholeheartedly support it—I certainly would—but I cannot see how any of the measures will open up a single new opportunity for financial companies to trade outside their own national markets across the single market beyond what is already open to them. Most if not all of the directives are about centralising regulatory powers over the financial sector in Brussels rather than in nation states. Monsieur Barnier did not dispute that, but he argued that the financial crisis had been caused by lack of regulation of ““British and American banks””, so it was essential to impose regulation at an EU level. I gently reminded him that the credit crunch had been sparked when a French bank, BNP Paribas, announced it could no longer put a value on its property funds, that it subsequently emerged that continental banks had far higher levels of gearing than Anglo-Saxon banks, and that the current euro crisis is, at its heart, a banking crisis, as continental banks are so under-capitalised that they cannot absorb the losses on their holdings of sovereign debt and their Governments cannot afford to recapitalise them openly and immediately, as British and American Governments did. Monsieur Barnier also argued that a single market requires a single rule book. However, that was promptly negated by his promise that that does not mean a one-size-fits-all regime and that"““we also need to allow considerable flexibility for national supervisors””." Either there are separate national rule books, or there is a single EU-wide rule book. We cannot have or pretend to have both—or rather we can, and in a sense we do. Under the second banking directive, any bank or similar financial firm can operate anywhere in the EU under the supervision of its home authority, so any individual bank can operate under a single rule book throughout Europe. Of course, that rule book must obviously meet minimum requirements agreed at EU level. I believe that that is the model that we should retain and encourage across Europe within the single market. That brings me to the issue of the draft fourth capital requirements directive, which will implement the Basel III agreement. The Committee discussed it at length with Mr Enria, chairman of the European Banking Authority, who strongly defended the EU's decision to set not only a minimum level of reserve that each country must require its bank to hold, but a maximum level that banks can be required to hold. We subsequently wrote asking for clarification of his reasons for setting a maximum, but found his arguments unconvincing. His claim that our setting a higher rate would somehow siphon off funds from other countries, or that it would be unfair if we made our bank safer than those of other countries, were not entirely convincing. In light of the Committee's experience, my interview with Monsieur Barnier and the evidence from Mr Enria, I believe strongly that the Prime Minister was right to seek to reintroduce what Monsieur Barnier called a dose of unanimity in decision making on financial markets. I hope that the Prime Minister will continue to press that with the support of both sides of the House.