David Cameron spells out EU treaty change concerns

BRUSSELS: British Prime Minister David Cameron demanded safeguards on Thursday to prevent more power going to new European Union financial watchdogs as a condition for backing any change to the EU's basic law, according to a document seen by Reuters.

Germany is leading a drive to change the European Union's Lisbon Treaty to enshrine a new system of budget controls aimed at tackling the euro zone debt crisis. But it needs the backing of Britain's reluctant government if it wants to involve all 27 EU countries in any change to the bloc's law.

At a meeting of EU leaders to decide how to tackle the debt crisis and pursue that amendment of the EU's fundamental law, Britain presented a list of concessions it would like in return for supporting such a move.

Cameron wants additional safeguards that would stop the EU's three financial watchdogs in charge of banking, insurance and markets from overruling country authorities.

"National supervisors should remain responsible for the day-to-day supervision of individual firms," the document said in a reference to Britain's desire to maintain its authority over the City of London financial district.

He believes this is needed to stop an EU watchdog such as the European Banking Authority ordering the recapitalisation of a British bank.

"This would stop Europe being able to impose additional costs on the British taxpayer," said one diplomat familiar with the British position.

The demands fall short of a full "opt-out" on new financial regulation that some officials had expected Cameron would seek.

Britain also wants to secure the permanent location of the European Banking Authority (EBA) in London, Europe's top centre for financial services.

Cameron is furthermore seeking a pledge from the EU to address the current rule of the European Central Bank that euro-denominated transactions be cleared within the euro zone. Britain wants it to be possible to clear such deals in London.

Finally, Britain wants to allow member countries the flexibility to beef up EU rules if they wish.

Relations between London and Brussels have grown strained as the European Union drafts new laws to tighten rules for banking and finance in the wake of the global financial crisis. London, Europe's financial capital, has the most to lose.

London is currently locked in dispute with Brussels about a new capital regime for banks, where Britain wants the flexibility to impose even stricter standards on its lenders.