FSA chairman Lord Adair Turner has warned that European regulation must comprise the right mix of financial integration and flexibility for national powers.
The International Monetary Fund has called for progress towards a pan-eurozone approach to issues such as the orderly wind-up of failed banks, compensation schemes and bank supervision. Speaking at a Central Bank of Ireland conference in Dublin last week, Turner said there is a “remorseless logic” to the argument that successful monetary union needs greater fiscal integration.
But he argued this needs to be tempered with the flexibility for countries to act on a national level where they feel it is necessary, pointing out recent credit and property booms were concentrated in specific countries of the eurozone but largely absent in Germany.
He said small countries with big banking systems, such as Ireland, need to be able to set capital requirements above and beyond those dictated at a European level.
Turner said: “As the IMF has argued in its latest global financial stability report, even if the path to a better system is inevitably a long one, the eurozone needs to set out a road map which leads to a sounder long-term design. That sounder design will need in some ways to be more integrated but in some ways not.”
Cube Financial Planning co-founder Mike Godfrey says the UK should either embrace pan-European regulation or pull out of the EU completely.
He says: “Promoting the ability to be able to act on a national level seems to go against the objectives of a united Europe. You are either part of the pan-European proposals or you are not, there cannot really be any middle ground.”