On 4 December 2012, the House of Lords Sub-Committee on Economic and Financial Affairs wrote a letter to Greg Clark MP, Financial Secretary to HM Treasury, regarding the EU Commission’s proposal for a Single Supervisory Mechanism (SSM).
The Committee believes that EU banking union is “urgently required” but recognises that it has potentially significant risks for the UK, particularly regarding the:
- risk of marginalisation and isolation on financial sector matters and the damage that this could do the position of London as a financial centre;
- threat to the integrity of the single market arising from amended voting structures within the EBA;
- possibility that the authority of the EBA (to which all 27 Member States are a part) could come under the influence of the ECB (which would supervise the operation of the SSM); and
- possible conflict of interest between the SSM supervisory role of the ECB and its responsibilities with respect to EU monetary policy.
The Committee is concerned with the proposed timetable for agreement of the SSM, which it regards as rushed and “wholly unrealistic” (although if this FT article is anything to go by we may not see banking union as soon as was first thought). It also regards attempts to implement banking union without a common deposit scheme, as required by Germany, as being “unsustainable”.