Bank of England governor Mark Carney has warned that European Union regulation needs to be more flexible and tailored to member states or it will risk the Bank’s ability to oversee the UK economy.
Speaking at the Cairncross memorial lecture at St Peter’s College, Oxford last night, Carney laid out the BoE’s stance on Britain’s membership of the EU.
He took aim at the bankers’ bonus cap in particular, saying it is “restricting the proportion of pay that can be clawed back in the event of excessive risk taking or poor conduct, thereby weakening discipline from remuneration”.
He added that there should be additional “national discretion in insurance supervision” and also urged for better protection for non-euro members.
He said: “The future direction of EU financial reform should recognise that the EU comprises multiple currencies with multiple risks.
“It is desirable, particularly given the weight of the ECB and of the members of the single currency within the EU, that there are clear principles to safeguard the interests of non-euro member states.”
However, he supported a reformed EU membership, saying membership so far has provided more openess and dynamism in the UK economy, but warned it risks restricting UK markets with onerus regulation.
Carney said: “Overall, EU membership has increased the openness of the UK economy, facilitating dynamism but also creating some monetary and financial stability challenges for the Bank of England to manage.”
However, he said domestic regulation following the crisis must be “further buttressed by an evolution of the EU regulatory framework that continues to work for all members of the EU”.
The Bank of England also released an accompanying report setting out the Bank’s stance on membership.