This clearly relates to the current EU proposals implementing the Basel III requirements. Here the UK is keen to push ahead, imposing stricter capital requirements on UK banks. However, the Commission could block this by stating that all member states must adhere to their minimum and maximum levels, to avoid distortions to the Single Market. This difference raises a few key points to keep in mind during the debates over Cameron's veto:
1) The UK government is not pushing for more or less regulation on financial services, merely more suitable regulation and smarter control. The EU is keen to punish practices which it sees as problematic, such as short selling and the use of credit default swaps, but when it comes to tackling a fundamental problem in the make up of the financial system it dodges the issue. This is mostly because the eurozone states fear excessive deleveraging, while they cannot afford to recapitalise the banks using public money. Valid fears, but it highlights the differing needs for the UK and European financial sectors.Leaving aside whether he asked for the right thing and the viability of his negotiation strategy (and here there are clearly lessons that need to be learnt), the demand highlights the crux of the issue for the UK. It is not about stopping regulation on the city but about realising that in some areas the UK may see a need to tailor its regulatory system in a way that better suits its economic and financial circumstances - but under general provisions of EU law, rather than special UK 'opt outs'. Much of the media coverage and comments relating to this point have left much to be desired in the accuracy department.
2) Leading on, the UK has a much larger financial sector - solvency is therefore paramount. This point is clearly highlighted by the FSA report into the failure of RBS which was released today. The UK cannot afford another crisis and another series of bank bailouts. This is a concern and problem which the many in Brussels and in some national capitals seem to not fully appreciate. The lack of scope for allowing the UK to deal with what it sees as a key issue is hypocritical given the number of times which the UK has been tagged as an 'awkward partner'.
3) Cameron wasn't asking for a UK specific opt-out. He asked for unanimity to be applied allowing all countries the option to veto maximum requirements. This highlights how the myth of 'special treatment' seems to be unfounded.