BoE's Cunliffe does not expect UK to join EU banking union
By Huw Jones and David Milliken
LONDON (Reuters) - Britain is unlikely to join the European Union's banking union, which is centred on the euro zone, as it is not needed for being part of the wider EU single market, Bank of England Deputy Governor Jon Cunliffe said on Thursday.
Cunliffe told a committee of Britain's upper house of parliament that the banking union, where the European Central Bank supervises lenders, was needed for euro zone members because of their shared currency and shared lender of last resort.
He did not expect Britain to join the union, which is also open to EU member states that are not part of the single currency area.
The banking union still had not solved the issue of which governments would bail out banks in a crisis, said Cunliffe, who previously was Britain's top diplomat to the EU.
"I don't think a banking union is necessary to operate a single market in financial services," Cunliffe told the committee.
"I can't see why, when we retain responsibility for our currency, for our central bank and lender of last resort, why it would be necessary in terms of accountability (or) desirable to make that step," Cunliffe said.
Britain's ability to shape EU financial rules is part of Britain's "new settlement" being negotiated with the bloc ahead of a British referendum on continued membership of the EU.
Cunliffe said deepening euro zone integration would not reduce Britain's role in EU financial supervision given it is Europe's biggest financial centre.
"There will be issues about how future European regulation is built and conceived. The importance of the UK within the European Union on this issue, I don't think will change," Cunliffe added.
He said the EU was "not there yet" in terms of being able to handle the failure of a major cross-border bank smoothly. Lenders needed another four years to build up buffers of bonds for writing down to bolster capital levels in a collapse.
The banking union has created a Single Resolution Board from January to handle failures of lenders, but Cunliffe cast doubt on its ability to move swiftly and coherently in a crisis.
"If you look at the number of people that would have to come to the table to deal with a resolution, it's quite a few. It can be made to work, but I think they need to work through those issues as to how those different responsibilities and authorities would interact in a crisis. There is more work to be done," Cunliffe said.
(Reporting by Huw Jones, editing by David Milliken and Angus MacSwan)
