Some members of the financial industry in the UK are up in arms at the European Commission's plans to create a new layer of financial supervision at EU level that could, at least in theory, overrule national regulations. Given the intrusive and bureaucratic nature of the Commission's proposals for oversight of alternative fund managers, you can understand their wariness of any new blueprints for the industry coming out of Brussels. But this time there are grounds for a more nuanced reaction.
The Commission has proposed the creation of a European Systemic Risk Board - possibly chaired by the president of the European Central Bank - that would identify and assess threats to the stability of the European and global financial system, and if necessary make recommendations for action.
Meanwhile, a European System of Financial Supervisors would set common regulatory standards for individual financial institutions. The structure, which would comprise separate supervisory authorities for banking, insurance and the securities industry, would not be involved in day-to-day regulation of financial firms but would be able to step in under certain circumstances, for instance in cases involving more than one EU jurisdiction where the respective national regulators did not agree.
Although the proposals are based on a report delivered in February by former International Monetary Fund managing director Jacques de Larosière, there is much in the proposals that is up for debate. But with EU heads of state and government set to approve the plan in principle at their summit in Brussels later this week, there's no time to lose for the industry to exert its influence on the final outcome.
Contrary to some fears, this doesn't look like a plot by the continental European powers against the City of London (although the draft directive on alternative managers is harder to call). For instance, Germany has expressed support in principle for the proposals but wants to get a better idea of how they would work in practice
British minister and former financial sector luminary Lord (Paul) Myners has expressed concern about the independence of national regulators and questioned the intrusiveness of the proposed system. The UK has already won assurances that the EU supervisory system will not have the power to order national governments to spend taxpayers' money rescuing stricken financial firms.
But even Myners agrees that harmonisation of financial regulation is a good thing in principle. There is widespread sympathy for the idea that in a financial world characterised by cross-border institutions and transactions, a co-ordinated supervisory authority is preferable to the current system of ad-hoc co-operative arrangements.
It's become a cliché to say that "the devil's in the details" of regulatory reform, but that doesn't make it any less true. Will EU policy-makers setting next year as the target date for implementation of the changes, the Commission will have to draft legislation by the autumn for approval by member states and by the newly-elected European Parliament. Like it or not, the EU's über-regulator is one the way - the debate is now underway on what it will be able to do and under what circumstances.