EU plans for pan-European financial regulation do not go far enough in protecting the role of national regulators, Welsh Conservative MEP Kay Swinburne has warned.
Dr Swinburne, who is Economic and Monetary Affairs coordinator for the European Conservatives and Reformists Group in the European Parliament, said she has concerns about the European Systemic Risk Board which is likely to be headed up by the European Central Bank (ECB).
The board will have powers to sound alarm bells if it sees emerging threats to the financial system. It may have the power to force a country to take action, even if the national supervisor disagrees.
Three other bodies will be set up - the European Banking Authority, the European Securities and Markets Authority, and the European Insurance and Occupational Pensions Authority - to create new standards for supervisions and to establish common rules across the EU.
Whilst recognising the importance of enhanced global coordination and cooperation through improved European and global financial supervision, Dr Swinburne will seek to strengthen the independence of national supervisory bodies when the proposals come before the European Parliament.
She said: "A common rule book should be welcomed but supervisory decisions relating to individual firms must remain at national member state levels.
"We do need a strong early warning system at the EU level that can monitor, name and shame countries that allow excessive risk to be taken. However a pan-European risk board will be a large and unwieldy body and there is no guarantee that it will be better at detecting systemic risks than the organisations that preceded it. The board must remain completely free of any political interference.
"Our real concerns surround the power that the supervisory bodies will have to overrule national regulators.
"The safeguards the commission claims to have drafted into the plans will be insufficient to prevent the ECB from usurping risk-taking on a pan-European level. Ultimately, a sensible amount of risk is a key component of a vibrant financial services industry and national regulators understand their market conditions better.
"There is a serious question about the role of the ECB in the ESRB, given that 11 countries are not in the Eurozone.
"We need to get the structures right and the possible appointment of Mervyn King should not distract from the overriding concerns about loss of national control. We are trying to create a supervisory structure for the foreseeable future, and such important decisions should never rest on the appointment of one man.
"Although we support well regulated financial markets we believe any changes to the supervisory architecture need to be aimed at restoring confidence in the financial system and improving the quality of coordinated supervision within the EU and globally."