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By The European Court of Justice ruled on Wednesday that an EU body, the European Securities and Markets Authority (ESMA), does have the power in emergencies to ban short-selling or bets on falling share prices.
It was a blow to UK attempts to stop further centralisation of regulatory power at the expense of member states.
In a debate on Thursday in the European Parliament's economic affairs committee on a draft law to regulate benchmarks, lawmakers said the court ruling should help determine ESMA's role in supervising top benchmarks like the London Interbank Offered Rate or Libor.
Britain wants to keep supervising Libor but some EU lawmakers said the court ruling should be taken on board when it comes to determining ESMA's role in benchmark supervision.
"The court has just given us some major support... and it's very appropriate in this dossier," Sylvie Goulard, a French Liberal member, told the committee.
Several banks, including Barclays (>> Barclays PLC) and Royal Bank of Scotland (>> Royal Bank of Scotland Group plc) have been fined for rigging Libor, prompting the EU to propose the law. Probes into possible manipulation of foreign exchange benchmarks have added urgency.
"We have not yet seen the worst of it. When we come to discover how big the scandal is around forex, then Libor may seem to have been just an amusement," Philippe Lamberts, a Belgian Green Party committee member said.
An official from the European Commission, which writes the first draft of EU financial rules, said the ruling will allow it to propose new roles for ESMA that are legally well founded.
Thursday's debate highlighted splits among the parties over ESMA's role and over the scope of the new law, in particular whether commodity benchmarks like oil should be excluded.
"We should be looking for as wide a scope as practical," said Emilie Turunen, a Danish centre-left member, adding that her party wants a strong role for ESMA so that it can intervene in top benchmarks.
In written comments to the committee, British Conservative lawmaker Syed Kamall said, "We should not be regulating a benchmark simply for the sake of it. The supervision of Libor should remain in the UK."
The committee's chairman, UK Liberal Democrat Sharon Bowles, proposed that ESMA could have responsibility for top benchmarks with day-to-day supervision delegated to a country.
The committee aims to vote on the rules on February 17.
EU states have joint say on the draft law and have yet to begin scrutiny. European Parliament elections in May will also delay a final deal on the rules until at least later this year.
(Reporting by Huw Jones; Editing by Tom Heneghan)
By Huw Jones
