Turner: More balance needed on Euro regulation

FSA chairman Lord Adair Turner will today warn that European regulation must comprise the right mix of financial integration and flexibility for national powers.

In a speech today at a Central Bank of Ireland conference in Dublin, Turner (pictured) will agree there is a “remorseless logic” to the argument that successful monetary union needs greater fiscal integration.

The International Monetary Fund has called for progress towards a pan-eurozone approach to issues such as the orderly wind-up of failed banks, compensation schemes and bank supervision.

But Turner will argue this needs to be tempered with the flexibility for countries to act on a national level where they feel it is necessary, pointing out recent credit and property booms were concentrated in specific countries of the eurozone but largely absent in Germany.

He will say small countries with large banking systems, such as Ireland, need to be able to set capital requirements above and beyond those dictated at a European level.

He will say: “As the IMF has argued in its latest Global Financial Stability Report, even if the path to a better system is inevitably a long one, the eurozone needs to set out a road map which leads to a sounder long-term design. That sounder design will need in some ways to be more integrated, but in some ways not.”

Turner will stress that the UK supported the creation of new pan-European regulators, known as European Supervisory Authorities, which will enforce financial services regulation across Europe and guard against the dangers posed by firms operating in one country and being based in another.

He will say: “At the European Union level we will therefore have to find ways forward – both in the arena of overall macroeconomic co-ordination and of financial stability – which achieve required integration within the euro area which do not seek to apply unnecessary integration to non-euro members, but which also maintain the level playing field of an EU 27 single market.

“Achieving that balance will be difficult, requiring careful institutional design. But success is essential.”