On May 27th a 16-page bombshell from the European Commission, outlining a new framework for pan-European financial supervision, hit Whitehall. Not exactly unexpected, it foresees a supervisor with real executive power and the ability to force terms on disputing governments in a crisis. Moreover, it gives members of the euro zone a bigger say on questions of systemic risk than those who have clung to their own currency: through two members of the European Central Bank's governing council, on which Britain has no seat.rnBritish regulators are unhappy. They would rather see a decline of relatively unfettered branch banking throughout the European Union (eu), and apply stiffer prudential rules to foreign branches on their turf, than honour eu passports for bank branches and enforced burden-sharing when some banks go bust.rnThis may seem arcane, but for the British, who have long occupied the intellectual high ground of financial policymaking in the eu, it is a blow to see the initiative wrested from them. Their reputation has yet to recover fully from the collapse of Northern Rock, a mortgage lender, in 2007. They are still smarting, too, from the collapse last October of two Icelandic banks with operations in Britain, which left British taxpayers footing some of the resulting compensation due to depositors.
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