MEP and Economic and Monetary Affairs Committee chair Sharon Bowles has warned proposals for a eurozone banking union could split the single market and force the UK to leave the EU.
Earlier this month, the European Commission published its proposals for the European Central Bank to take over banking supervision for eurozone countries.
It is seen as the first step to building a union that would see all eurozone countries jointly back euro-area banks to ensure financial stability and help end the continental crisis.
The Economic and Monetary Affairs Committee debate was dominated by concerns that the 10 nations that are not in the eurozone may be disadvantaged by the proposals.
Belgian MEP Marianne Thyssen argued that empowering the European Banking Authority, and not the ECB, would help provide one set of rules that included those not joining the banking union.
MEPs were also concerned about the accountability of the ECB, the need for clear division between EU and national regulators and different supervision arrangements for banks.
Speaking at the Liberal Democrat conference in Brighton this week, Bowles said she is “disappointed” with the proposals, adding they could have major ramifications for the UK.
She said: “Now that many of the backstops have been removed the idea of having a banking union needs to be questioned. If it is not a proper union and just a supervisory union then is it worth the cost?
“I don’t think the EU wants to lose the UK and the 15 per cent it contributes to the EU Budget, but if push comes to shove between saving the euro and keeping the UK then they will save the euro. It is not the kind of attitude with which we want to be bargaining because it will see us go out.”
Bowles said the Bank of England must build stronger ties with the ECB and not view it as a rival.
A public hearing is set to take place on 10 October with draft reports due to be published on 22 October.