A Financial Update from the European Parliament

4.00.00pm BST (GMT +0100) Wed 15th Oct 2008

Last week, while the markets plunged, and cries went out for coordinated action over the EU, we took the vote in the Economic committee on the insurance directive, Solvency ll. This directive leads the way for more sophisticated supervision across groups and countries and was always reckoned to show the way for corresponding changes in banking supervision. When the current crisis is over, these will be the paving stones for the new generation of supervision. So eyes were on this vote.

It went well, though there has been blood on the floor in the negotiations. Many MEPs have called for cooperation in Parliamentary reports, but then did not step up to trust in pooled supervision in actual legislation. But at least we got further than the European Finance Ministers; they intended to vote on the same day but reached no agreement at all.

Most of my amendments and my opinion from the legal affairs committee have been incorporated. With one notable area of exception - consumer protection!

So while the market howled and Governments competed in escalating deposit guarantees, the EPP with Tory help voted down consumer protection. One amendment was designed to ensure ongoing supervision to safeguard policyholders in the event of winding up! Fortunately my work on cross-border winding up has resulted in recognition of the need for detailed implementing regulations.

On the Wednesday of the Government's announcement of its rescue package, we debated the financial turmoil with the French Presidency. From the EU perspective it was a good thing that the UK announcement was made after the meeting of the European Finance Ministers. Both the Presidency and the Commission stated glowingly that everything the UK had done was in line with the agreed guidelines. So I differ from commentators who said it was 'too late' for the City. It was essential timing to keep an EU approach on track, which now appears to have been delivered with success.

Socialists in the debate were keen to announce the death of capitalism. However, we should remember that the money is not just 'handed over' to banks but invested with prospects of return. So the state is being the entrepreneur of last resort - doing what Warren Buffet did with Goldman Sachs. Of course it would be better if the state had not needed to take the risk of an entrepreneur, but the alternative is worse.