She suggested that to legislate for a common method of regulation would create a massive and dislocating economic distortion rather than increased prosperity.

Ms Ussher was speaking to the Centre to European Reform on supervision of financial services in the EU, and the challenges and opportunities of creating wealth by breaking down barriers in financial services markets.

She proposed that the most effective way to do this was to move away from more regulation and towards ensuring benefits from the decisions that have already been made, and suggested that it is important to be in constant dialogue with the financial services sector, so that the Government can ensure that their voice is heard at the EU negotiating table.

Encouraging industry input with regard to EU financial services supervision, the UK Treasury and the Financial Services Authority (FSA) have published a discussion paper on the review of the Lamfalussy Arrangements for financial services supervision, a four-layered approach to regulation and supervision.

The City Minister announced that:

"I hope that we can make the Lamfalussy arrangements work more effectively in future - both for Britain and for the rest of Europe. To do that, they need evolution not revolution; we must avoid drifting towards a pan-European regulator that would be rigid and stifling. "These arrangements have provided an effective framework for enhancing regulatory efficiency and supervisory cooperation over the long term. But we think - pro-European but pro reform in Europe - that there are some practical enhancements that can be made that will deliver tangible benefits."

She went on to suggest two guiding principles for regulations, namely that:

• Regulation and supervision should not be ends in themselves, but should aim to improve markets, and deliver economic benefits. To do that, they should be proportionate, support innovation, competition and efficiency; and promote financial stability; and
• Regulation and supervision should recognise the need for regulators to be accountable - principally through their Ministers to national governments and parliaments.

Ms Ussher concluded:

"We can see the benefits of action in the European stage, but that doesn't mean we shouldn't work to make that action as effective as possible and ensure that the interests of the British financial services sector are at the heart of EU decision-making."

"The revised Lamfalussy arrangements can continue to play a major part in strengthening the single market in financial services, benefiting businesses, consumers and our economies, while Europe will have another political and economic achievement to be proud of."