Europe's banking watchdog: 'Strong interest' in Britain remaining in EU

Europe's banking regulator has urged the UK to remain part of the European Union, saying the City of London is “an important hub” for the single market.

Andrea Enria, chairman of the European Banking Authority (EBA), said that staying in the EU brought major benefits for Britain, and there was a “strong interest” across Europe in keeping the UK in the single market.

It came as the European Central Bank (ECB) dropped its opposition to London-based clearing houses carrying out large euro-denominated transactions, in a major victory for the City.

The ECB, which this month saw its attempt to force large euro-denominated deals to be cleared in the eurozone thrown out by European courts, said it would not appeal against the judgment and had reached an agreement with the Bank of England on cross-border deals.

In an interview with the The Telegraph, Mr Enria outlined the case for the UK to stay in the EU. “In general, there is a lot of benefit for London in staying in the single market,” he said.

^{Mr Enria is the chairman of the European Banking Authority (Bloomberg)}

“I think there is a strong interest in London and the UK financial industry in maintaining this role [as the EU’s financial hub], and there is, in my view, a strong interest for the European financial markets in maintaining this link.”

His comments, which are unusual coming from a regulator, come after Standard Life chairman Sir Gerry Grimstone said last week that leaving the single market would be “disastrous” for the UK.

“There are more than 1m jobs in the financial industry here, 80pc of the European hedge fund industry is located here, 70pc of private equity and three quarters of the investment banking and capital markets activity is transacted in London, so London is an important hub for the EU,” Mr Enria said.

The EBA is the key banking regulator across the European Union, tasked with creating a single set of rules for banks in the bloc’s 28 countries.

This month, it unveiled proposals for a stricter set of guidelines on pay, which angered the City watchdog. The Financial Conduct Authority said draft proposals that even small banks and building societies should abide by Brussels’ rules on bonuses was disproportionate, and urged firms to voice their opposition.

Mr Enria said that he was “surprised” by the FCA’s response, but the chairman extended an olive branch to the British regulator, saying that the EBA had a “strong intention” to ask Brussels to relax the rules.

The EBA chairman defended his authority’s draft guidelines, saying they were simply an interpretation of existing European Union legislation.

“We at the EBA think the proportionality principle should be strongly applied, the problem is that as regulators we should abide by the rules,” he said.

“The European legislation does not allow carving out… especially the requirements on deferral and payment in instruments from the smaller, simpler institutions which do not pay huge bonuses, so we think this is a problem.”

Mr Enria added: “There is a strong intention of the EBA board to… when we have solid evidence, go to the lawmakers and say we think the legislation should allow this.”

^{The Bank of England reached an agreement with the ECB on Sunday (Alamy)}

On Sunday, the European Central Bank and the Bank of England reached a co-operation agreement on British companies clearing euro-denominated transactions, which saw the former drop its opposition to such transactions taking place in London.

The ECB had attempted to force all euro deals to take place in the eurozone, a move that would have threatened thousands of City jobs, but the European Court of Justice blocked it after a challenge from the Treasury.

On Sunday, the ECB said it would not appeal against the ruling. George Osborne, the Chancellor, said: “This is vital to our relationship with the eurozone, and is another step forward in terms of a reformed EU.”