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Britain Remains a Dissenter as Europeans Try to Set Capital Reserves for Banks

BRUSSELS — A meeting of European Union finance ministers turned a little unruly late Wednesday when George Osborne, Britain’s chancellor of the Exchequer, accused his counterparts of making him look like an “idiot” because he pushed for approval of stricter banking laws.

When the meeting finally broke up, Britain stood mostly alone among 27 European Union member states after refusing to give its blessing to a deal on capital requirements for banks to fortify them against a future crisis.

“Only one, maybe two, delegations disagreed in the end,” Margrethe Vestager, the economic minister of Denmark, told a news conference early on Thursday morning after 16 hours of talks.

Ms. Vestager, whose country currently leads the rotating presidency of the organization, said she hoped the deal would be approved by all countries at a followup meeting of finance ministers on May 15. “We are very, very close” to completing the law, she said.

Even if Britain still objected, the law could pass into force by a majority vote of other states and after approval by the European Parliament.

Earlier in the day, Mr. Osborne challenged his fellow European finance ministers to carry out the international accord, known as Basel III, raising the minimum amount of capital that banks are required to hold.

But after 10 hours of talks, a testy Mr. Osborne said that a deal on the table was inadequate because it failed to take into account his concerns and would subject Europe, and him, to ridicule at a time when the region was struggling to emerge from its debt crisis.

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From left, Anders Borg of Sweden, François Baroin of France, Michael Noonan of Ireland and Luis de Guindos of Spain gathered at Wednesday’s meeting of finance ministers in Brussels.Credit...John Thys/Agence France-Presse — Getty Images

“We’re not implementing the Basel agreement, as anyone who takes a look at this text will be able to tell you — every bank analyst, every financial journalist, every other finance ministry in the world would say that,” said Mr. Osborne, referring to Basel III, the accord to raise the minimum amount of capital that banks are required to hold.

“I am not prepared to go out there and say something that would make me look like an idiot five minutes later,” Mr. Osborne said.

Miroslav Kalousek, the Czech finance minister, shot back, “George, looking like an idiot is one of the basic qualifications for a minister.”

That drew peals of laughter from assembled ministers at the late-night gathering in Brussels, but Mr. Osborne was infuriated by the jab.

“I represent the largest banking industry around this table by far,” Mr. Osborne said solemnly. “You’ve got to allow me to sit down and go through the issues, and you have not done that for 10 hours,” he said.

Mr. Osborne insisted that he was seeking rules that would be acceptable to regulators and authorities around the world including Jean-Claude Trichet, the former president of the European Central Bank, and his successor, Mario Draghi. “I will not be painted as somehow being anti-European or demanding something especially for London,” Mr. Osborne said.

Other ministers attending the meeting raised strong concerns about the proposed text, including Jacek Rostowski, the Polish finance minister.

Osborne said he supported efforts to reach a deal in negotiations that stretched well into Thursday morning.

Wolfgang Schäuble, the German finance minister, also expressed some concern, but had said a deal still was within sight. But France’s finance minister, François Baroin, left the meeting before the dust-up to watch the French presidential debate on television.

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George Osborne, Britain’s chancellor of the Exchequer, had a heated exchange.Credit...Thierry Roge/European Pressphoto Agency

Reluctantly, Ms. Vestager agreed to continue the talks.

The ministers had been seeking agreement on requirements for banks to hold capital reserves that would function as a cushion against future losses. The idea is to help avoid financial crises like the one brought on by the collapse of the American investment bank Lehman Brothers in 2008.

The European Union faces a deadline of January 2013 to start phasing in rules agreed on by the Basel Committee on Banking Supervision raising the minimum reserve to 7 percent of a bank’s assets.

Backed by Sweden, Britain held firm to its demand that national regulators retain the option to require their banks to build up higher reserves than foreseen under a proposal by the European Commission, the European Union’s executive body, without prior approval.

Britain has the largest banking sector in Europe in relation to gross domestic product, followed by Sweden, and has long fought efforts by the European authorities to exercise greater control over the City of London, the biggest financial center in Europe.

But central governments in London and Stockholm are also extremely wary of putting taxpayers on the hook for future bailouts of their banking sectors.

“My country has been very, very close to very deep problems in the banking sector twice and we don’t want to be there again,” Anders Borg, the Swedish finance minister, told his counterparts at the meeting earlier in the day.

Mr. Borg sought to dismiss the view that Sweden and other nations that support more stringent requirements were seeking to attract more business for their sectors on the basis that they would be better capitalized than their rivals.

“We are not trying to make our own banking system gain a competitive advantage to somebody else,” he said. “We are trying to safeguard our taxpayers and our society from the risks that a large banking sector is creating.”

France and Austria are among nations that firmly opposed that view, saying that raising reserve requirements in one country could lead banks based there to reduce lending to their foreign subsidiaries, in turn damaging the economies of those nations.

A version of this article appears in print on  , Section B, Page 3 of the New York edition with the headline: Britain Remains a Dissenter as Europeans Try to Set Capital Reserves for Banks. Order Reprints | Today’s Paper | Subscribe

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