The UK finance minister, Alistair Darling, is trying to block attempts to centralise the regulation of European Union (EU) financial markets. Italian finance minister, Tommaso Padoa-Schioppa wants the EU to introduce a single new rule book. But Mr Darling wants minor changes to the current system, which encourages co-operation between regulators in the individual member states.
The reforms are being discussed by EU finance ministers meeting in Brussels. The Italian proposals are a particular problem for the UK, which has built London as a leading financial centre using a "light-touch principles-based" approach to regulation.
Mr Darling is hoping for German backing - the two countries host 55% of Europe's wholesale financial markets between them.
Current arrangements are known as the Lamfalussy system, named after Alexandre Lamfalussy, the central banker who chaired the committee that introduced them in 2001.
The idea behind the system was that by encouraging national regulators to co-operate it would provide the same benefits as having a single overall EU regulator without the difficulties of getting it to fit all nations and take into account the varied conditions in individual countries.
The Lamfalussy system is a four-stage process by which financial services regulation is drafted and implemented.
Tuesday's discussions are centred on step three, which would involve setting up a committee of national regulators to advise on any new rules.
There have been some suggestions that this stage might be replaced with a European super-regulator.
In a statement, the UK Treasury said it, "supports a series of practical measures to increase the efficiency and effectiveness of the supervisory process, but opposes wholesale reform".
They come only a month after the introduction of the Markets in Financial Instruments Directive (Mifid), which is designed to make it easier to buy shares from another EU country.
Just as Mifid is supposed to make it easier to trade across European borders, the Italian proposals are meant to simplify the regulations facing multi-national financial companies.
© Graham Bishop
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