The Committee's report, The future of EU financial regulation and supervision, also warned there are some real difficulties with EC proposals for reform of EU supervisory bodies.
Overall, the Committee welcomed the steps (agreed in recent months at EU level) to improve the regulation of financial services by revising the capital requirements of institutions, increasing deposit guarantees across the EU and regulating credit rating agencies. However, it criticised the speed and manner with which the EC brought forward its latest proposals on regulating alternative fund managers.
It supported moves to set up a macro-prudential supervision body for financial services and markets in the EU and agreed that the de Larosière report made a powerful case for reform of micro-prudential supervision of financial services in the single market. However, it recognised that the role of the European Central Bank in such a body is a difficult issue, given that the ECB is the central bank for the eurozone but not the whole EU. The Committee said the UK government's thinking on the role, powers and structure of this body appeared less than fully developed and urged the government to remedy this if it is to influence final decisions in the coming months.
The report also examines issues such as the purpose of regulation and supervision, the process of legislative action (in the context of areas such as regulation of credit rating agencies, amendments to the Capital Requirements Directive and crisis management procedures) and home-host country supervision.
Lord Woolmer, who chaired the Committee for this inquiry, said: "The government is right to enter discussions on EU efforts to strengthen EU-wide macro- and micro-level supervision over the financial sector. But there are concerns," he said. "Financial services are a key, strategic industry for the UK. London operates in a global marketplace as well as in Europe. Many other EU member states do not share this perspective. The UK government must ensure these national interests are properly reflected in new regulations or in structural reforms.
"There are some worrying signs. The timing and pace of Commission proposals appeared dictated by the timetable of the European Parliament elections and the twilight days of the old Commission. The content of some proposals, especially those on regulation of alternative investment funds, was rushed with insufficient consultation and a weak assessment of likely impacts. The UK government has appeared to be behind the ball game at times. Getting things done right is now more important than getting things done fast."
The report will be available online shortly after publication at: http://www.parliament.uk/hleua