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UK wins concessions on EU bank reform
(Xinhua)
Updated: 2009-06-20 09:22

Diplomats said there was a common consensus to avoid a bust up with Britain over the issues given that summit was also focused on intense negotiations on a formula to persuade Ireland to hold a repeat referendum on the Lisbon Treaty which is designed to revamp the EU's decision making processes.

Irish voters rejected the treaty last year, and the government is planning to hold a second referendum in October if it gets guarantees that the country's neutrality, anti-abortion laws and tax regime will not be affected by the new EU rule book.

UK wins concessions on EU bank reform
UK Prime Minister Gordon Brown (L) talks with his Finnish counterpart Matti Vanhanen as German Chancellor Angela Merkel (C) passes by during the second day of the EU Summit in Brussels, capital of Belgium, June 19, 2009. [Agencies]

The compromise on financial regulation leaves open the question of whether responsibility to bail out sinking banks lies with the home nation of the financial group or the country hosting the subsidiary. The issue has been of particular concern for eastern European nations, whose financial sectors are dominated by Western banks -- mostly from Germany, Austria, Italy or Sweden.

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Those nations were willing to go along with the plan, in the hope of receiving support from the EU if they are forced to bail out their banks. But Britain objected to the principle of EU intervention on how it spends public money.

Friday's declaration effectively postpones a debate on how to resolve the apparent contradiction between granting the European overseers binding legal powers to resolve disputes between home and host nations, without giving them the authority to order fiscal intervention.

The new European Systemic Risk Board will monitor the overall economic situation. There too, Britain scored some success in blocking a call from Germany and France for the board to be granted permanent, high-profile leadership by the president of the European Central Bank (ECB).

Instead the compromise calls for the head of the board to be elected by the ECB's General Council, which is made up of central bank governors of all 27 EU members, even those like Britain who are not in the euro-currency zone.

Europe's new moves came two days after US President Barack Obama's announcement on Wednesday of what he called the most sweeping overhaul of US banking regulations since the 1930s.