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Britain does not want a pan-European regulator for financial services, City Minister Kitty Ussher will tell the Centre for European Reform on Wednesday. The firm stance comes as the Treasury and Financial Services Authority launch a discussion paper on a review of the EU Lamfalussy Arrangements for financial services supervision - a framework designed to make EU lawmaking more efficient. "I hope that we can make the Lamfalussy arrangements work even more effectively in future - both for Britain and for the rest of Europe," Ussher will say, according to Treasury officials. "To do that, they need evolution, not revolution; we must avoid drifting towards a pan-European regulator that would be rigid and stifling." A senior EU official last month criticised member states for not taking tough action against insider dealing and said there could be more convergence of regulation. The FSA, for example, has not brought a criminal case for insider dealing since it became responsible for enforcing the law in 2001. "We can see the benefits of action in the European stage, but that doesn't mean we shouldn't work to make that action as effective as possible and ensure that the interests of the British financial services sector are at the heart of EU decision-making," Ussher will say. EU Internal Market Commissioner Charlie McCreevy has repeatedly ruled out creating a pan-EU regulator akin to the U.S. Securities and Exchange Commission, saying it would have no hope of getting political backing. TARGETED CHANGES Sweeping change to Lamfalussy is already all but ruled out. An Inter-Institutional Monitoring Group was set up by the European Parliament, the European Commission and EU states to look at how Lamfalussy could be reformed. The group reported back last month, saying the focus of reform should be on strengthening the three so-called Level 3 committees which group the EU's national insurance, securities and banking regulators. The IIMG recommended that the three committees, which advise the European Commission on fleshing out financial services regulations and coordinate consistent enforcement of EU rules, should be given formal legal status, a clear pan-EU mandate and sufficient funding. Until now the committees have taken decisions by consensus and the IIMG recommended that qualified majority voting could be used but only for a narrow range of technical issues rather than for any politically sensitive matters. Ussher's remarks come ahead of proposals which are due from the European Commission for reviewing Lamfalussy and which are expected to mirror the IIMG's recommendations. "We think that some targeted, evolutionary approaches are the right approaches to try to improve the efficiency of the whole system," the Commission's head of financial services policy, David Wright, told a bond market conference last month. "The real focus is can we get level three committees to work more efficiently, to decide more efficiently, converge more quickly. The real debate is looking at that," Wright said. Draft EU rules to shake up how insurers cover risk will test how far states are willing to go to devolve regulatory powers. Solvency II seeks
to introduce the concept of a lead supervisor for cross-border insurers but
some smaller states fear being left with few powers over subsidiaries which
make up a big chunk of their markets.
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