By Simon Miller

London lobby group TheCityUK has warned that the UK cannot remain on the sidelines in discussions about banking union in the eurozone.

Speaking ahead of the European Union summit on Thursday (28.06.2012), TheCityUK's chief executive Chris Cummings said that the UK government should be aware of the impact a banking union could have on the single market. 

“The UK cannot remain on the sidelines in discussions about banking union. While we are supportive of much needed positive action from eurozone countries to answer the on-going crisis, banking union raises important questions for the single market," he said. "In particular, the UK needs to be vigilant about technical rules which could impact on the wholesale market based in London."

Cummings added that the UK derived strong benefits from the single market and the further expansion of it was a key ingredient for maintaining the UK as a global financial centre "that is attractive to financial firms from within and outside the EU".

He continued: "EU Leaders should recognise the essential contribution of the financial services sector to the economic recovery. Supporting bank lending to small and medium sized enterprises and promoting non-bank sources of finance is essential to growth and recovery. 

"We must also continue to pursue regulatory convergence between the EU and partners around the globe. At present engagement with countries outside the EU is under threat from regulatory proposals and restrictions, such as MiFID. If we place too many restrictions on the financial services sector we risk restricting economic growth."

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