Gearing up for another European drama

Away from the amateur dramatics in parliament this afternoon, the government is fighting yet another battle with the European Commission over banking reform. European leaders will vote later today on proposals to introduce the rubric of Basel III across European financial institutions. Led by EU Finance Commissioner Michel Barnier and ECB Vice-President Jean-Claude Trichet, these proposals would insist that minimal and maximum capital requirements are imposed on banks. The terms dictate that banks hold 7 per cent of their top-class assets in reserve.

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Britain opposes the scheme, not because the requirements are too steep: the UK’s Banking Commission has suggested that banks hold 10 per cent of their assets in reserve. Rather, Britain fears the loss of flexibility in regulation. As one might expect, Barnier’s arguments are couched in the hallowed terms of the Brussels lexicon: there is a need for ‘maximum harmonisation’ and a ‘single rule book’: words that elicit sighs of exasperation in Whitehall. Eroded