UK ex­emp­tion from EU bank rules ‘il­le­gal’, say lawyers

Financial Mirror (Cyprus) - - FRONT PAGE -

Ex­empt­ing Bri­tain’s banks from planned Euro­pean Union rules to curb risky trad­ing would be il­le­gal, the bloc’s lawyers said on Mon­day in a le­gal opin­ion that marks an­other set­back for UK at­tempts to limit Brussels’ in­flu­ence on the City, the news and pol­icy site Eurac­tiv re­ported.

EU fi­nan­cial ser­vices com­mis­sioner Michel Barnier has pro­posed a law that would slap curbs on so-called pro­pri­etary trad­ing or banks tak­ing bets on the mar­ket. It is sim­i­lar to the so-called Vol­cker Rule that the United States has al­ready ap­proved.

Bri­tain has ex­pected an ex­emp­tion from core parts of the draft law be­cause it has al­ready ap­proved a sim­i­lar rule known as Vick­ers, a law that re­quires banks like Bar­clays to wrap their de­posit-tak­ing arms with a “ring fence” of ex­tra cap­i­tal so that cus­tomers’ money is safe even if the trad­ing arm gets into trou­ble.

France was an­noyed that the draft EU law as pro­posed con­tained an ar­ti­cle - known as Ar­ti­cle 21 - that ef­fec­tively ex­empted Bri­tain be­cause it had passed its Vick­ers rule into law by a cer­tain date.

“The dero­ga­tion mech­a­nism es­tab­lished in Ar­ti­cle 21 of the pro­posed Reg­u­la­tion is not com­pat­i­ble with the le­gal ba­sis of the pro­posal, with the na­ture of the pro­posed in­stru­ment as de­fined in the [EU Treaty] and with the gen­eral in­sti­tu­tional prin­ci­ples es­tab­lished in the Treaties,” the le­gal opin­ion con­cluded.

A le­gal opin­ion from lawyers for the mem­ber states’ coun­cil car­ries weight and will al­most cer­tainly force the Euro­pean Com­mis­sion to make changes to the pro­posal, Eurac­tiv com­mented.

Bri­tain’s Prime Min­is­ter David Cameron has pledged to ne­go­ti­ate a new “set­tle­ment” with the EU in or­der to curb its in­flu­ence over the UK fi­nan­cial ser­vices sec­tor, the EU’s big­gest and a ma­jor tax earner for Bri­tain’s Trea­sury.

Bri­tain has al­ready lost a chal­lenge in the EU’s top court against an EU law giv­ing the bloc’s mar­kets reg­u­la­tor pow­ers to ban short-sell­ing, and is also chal­leng­ing two other EU poli­cies, in­clud­ing a pro­posed tax on fi­nan­cial trans­ac­tions.

The le­gal opin­ion will be an­other blow for Bri­tain’s at­tempts to limit the reach of EU rules on one of its most im­por­tant eco­nomic sec­tors as may give more am­mu­ni­tion to the UK In­de­pen­dence Party whose anti-EU stance helped it come top in the Euro­pean Par­lia­ment elec­tions last month in Bri­tain.

The le­gal opin­ion, dated June 16, looks solely at the le­gal­ity of Ar­ti­cle 21 in the draft EU law to curb risky trad­ing at banks.

It al­lows a mem­ber state which has al­ready adopted laws with the same aims as the EU mea­sure to make a re­quest to the EU’s ex­ec­u­tive Com­mis­sion for an ex­emp­tion from parts of the mea­sure which re­quire the sep­a­ra­tion of some trad­ing ac­tiv­i­ties from the main part of the bank.

The Com­mis­sion has said this would al­low mem­ber states that have al­ready taken steps to curb risky trad­ing to avoid costly align­ment of ex­ist­ing, ef­fec­tive pro­vi­sions with the bloc’s pro­posed law.

To qual­ify for the ex­emp­tion, na­tional leg­is­la­tion must have been ap­proved be­fore 29 Jan­uary and meet cer­tain cri­te­ria, con­di­tions which bankers say Bri­tain meets.

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