City fears exodus as EU boosts regulation
European Union measures to regulate the financial markets will not "penalise" the City of London, the commissioner responsible has told British MPs.
French internal market commissioner Michel Barnier insisted he was committed to ensuring that the EU's financial services sector remained internationally competitive.
But giving evidence to the Commons Treasury Committee at Westminster, he acknowledged that he could not rule out the possibility that some firms would leave the EU for less tightly regulated jurisdictions.
He also confirmed that the European authorities would, in certain circumstances, be able to override decisions taken by national regulators like the Bank of England.
Mr Barnier faced two hours of often hostile questioning, particularly from Tory MPs who complained that his "protectionist" measures would drive business away from the City.
At one point he was rebuked by committee chairman, Andrew Tyrie, who told him: "We understand the points you are making but, with respect, they are not answering the questions we are asking."
Michael Fallon, the Tory Party deputy chairman, said that plans to regulate private equity firms and hedge funds risked a "flight of liquidity" from the City to the United States or Singapore.
"How does it do anything but undermine the depth of trading that is done in London?" he asked.
Mr Barnier retorted: "I think what might undermine the depth of the financial industry is a further crisis of the sort that we had which is not foreseen or handled properly."
He added: "I do not wish to do anything to penalise competitiveness. But I want the European financial industry to be placed on a sound footing."
While Mr Barnier said that he approached the issue of financial regulation "with confidence and without naivety", he acknowledged that he could not rule out the prospect that some firms would re-locate out of the EU.
"I can't say no-one is going to leave Paris, Frankfurt or London to go off to Singapore or Switzerland.
"They too, however, have reason to be attentive to what the major financial powers of the world decide together," he said.