King tipped for major role on pan-European watchdog

Published on Tuesday 22 September 2009 21:01

SPECULATION mounted yesterday that the Governor of the Bank of England might be given a prominent role within a new European super-watchdog being set up to monitor banks and market risks.

The European Commission is set to unveil its blueprint to shake up monitoring of financial services, creating pan- European watchdogs for banks, markets and insurance, and a separate body to spot early signs of a new financial crisis.

But backing from Britain – home to Europe's biggest financial centre, the City of London – will be crucial to plans to set up the new financial services monitoring structures by the end of next year.

Ministers are nervous because the laws may give more say to European institutions.

In particular, Britain has taken exception to the fact that the European Central Bank president, Jean-Claude Trichet, will head the European Systemic Risk Board, a body that will watch for financial risks.

But diplomats yesterday said blessing for the package of measures that includes a new super-watchdog for banks could be secured if European countries back BoE Governor Mervyn King, left, as the Frenchman's deputy. "That could be one solution," said one diplomat involved in the negotiations.

"That is what Britain is pushing for," said another. "With the largest interest in all of this stuff, Britain feels the need to have quite a prominent voice on that body."

This is not the first time such a compromise has been aired. Last May, European Union monetary affairs commissioner Joaquin Almunia gave a strong hint that King could deputise for Trichet.

Almunia said at the time "it would be logical to appoint as vice-president of the (board] a governor of a non-euro area central bank and you know of whom we are thinking".