LONDON — U.K. proposals requiring banks to ring fence their retail operations in separate units will be compatible with new EU financial regulation, the European Union's single market chief said Monday.
EU internal market commissioner Michel Barnier told an audience in London the U.K.'s proposed Vickers reforms won't fall foul of single market rules that seek to impose uniform standards for banks' capital and liquidity across the region.
"I believe our proposals strike the right balance between common standards for all, in the interest of both consumers and banks, and flexibility to adapt to national specific requirements," Barnier said.
"I believe Vickers can be implemented in a way that is compatible with European rules."
Relations between the EU and U.K. have been frosty since December, when Prime Minister David Cameron refused to sign up to a new EU treaty after failing to win concessions on aspects of financial regulation.
In a speech to bankers at London's Guildhall, Barnier said European leaders were right to reject the prime minister's demands because those amounted to safeguards that would have given the U.K. a veto on financial services issues.
"Opening the door to unanimity on financial services would mean similar demands in other sectors from other member states. And that would spell the end of the single market," Barnier said.
The commissioner, who was to meet U.K. Chancellor of the Exchequer George Osborne later Monday, sought to assuage fears that EU proposals for regulating financial services would prevent the U.K. from imposing its own rules on banks and limit policy makers' ability to exercise new powers aimed at safeguarding the stability of the financial system.
Barnier insisted the EU is seeking only "basic banking rules" and wants national supervisors to have "considerable flexibility." But he said new EU-wide supervisors are also necessary because many financial institutions operate across borders.
The commissioner said a tax on financial transactions would not be imposed on the U.K. without its consent. Such a tax would be "feasible and just" following taxpayer bailouts of the financial sector, he said.
The U.K. opposes proposals for a financial transaction tax in the EU on the grounds that it would drive business away from London.
Barnier said the European regulatory agenda this year will include working out how to police unregulated "shadow banks" and drawing up an EU-wide plan for preventing or managing major bank failures without help from taxpayers.
