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Indeed, and that is the point that I was trying to make about the legal basis for the powers that will be used to set up these authorities. It appears to be a matter of some debate whether the appropriate legal basis is being used. If that is not clarified properly, I can foresee a situation in which the moment these authorities seek to make the first difficult decision that an institution or member state does not like, challenges in the European Court will be resorted to. At a moment of crisis, when we want prompt action to be taken, the fact that there is no legal certainty-or no appearance of legal certainty-will lead to chaos. That is why I think that it is vital that legal certainty on these powers is sought before the proposals are approved. We can debate whether the powers are right or wrong, but there must be legal certainty to avoid that chaos. The Government have a responsibility to the financial services sector in London and more widely across Europe to ensure that there is that legal certainty.
Let me go back to fiscal sovereignty. As I said, the proposals create a new European systemic risk board and the June ECOFIN conclusions said that its function would be to
"Define, have access to and/or collect as appropriate, and analyse all the information relevant for identifying, monitoring and assessing potential threats and risks to financial stability in the EU that arise from macro-economic developments and developments within the financial system as a whole".
It has limited powers that follow on from that analysis. It has the power to issue risk warnings to regulators and policy makers, and it can recommend legislative action where appropriate. It cannot insist on those actions being followed up-it purely has the ability to recommend. I do not think that that should cause us any concern at the moment. We are in favour of bodies on a regional or global level analysing and understanding risks and presenting their thoughts on the consequences of those risks.
The three new authorities replace the existing level 3 committees and will cover the same areas of banking, insurance and securities regulation. Whereas the ESRB will lack a legal personality, the ESAs are explicitly given one. Just like the ESRB, the new supervisory authorities will research, collate and comment on relevant micro-prudential issues. They will also be responsible for developing binding, harmonised technical standards. If an individual member state is in breach of those standards, and an issue cannot be resolved, one of the supervisory authorities might make a final decision via binding mediation.
We can see already that we are in danger of breaching the red lines that the Chancellor initially laid out. This is another example of the rather laidback approach that the Government have adopted to their policies. Back in June, before ECOFIN, Lord Myners said that
"the Government does not agree with the Commission's proposals to give a European body powers to change national supervisory decisions, or powers over individual firms".
That is exactly where we are in danger of heading. The ESAs will be able to act on both areas through binding mediation, in the case of disputes between national authorities under article 12, and the binding power to ensure that firms and national authorities comply with EU law when the Commission declares an emergency situation under article 10.
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