Banking union must not be allowed to undermine the EU’s single market in financial services and will not work without EU-wide tools that allow direct injection of money into troubled banks, Ireland’s top banking regulator has warned.

Matthew Elderfield, deputy governor of the Central Bank of Ireland, told the Financial Times he plans to use a speech in London on Monday to call for safeguards to protect the UK and other “out” countries that belong to the EU but are not among the 17 eurozone nations seeking to centralise bank supervision at the European Central Bank.

Mr Elderfield plans to back concerns raised by the UK and other non-eurozone members that the European Banking Authority, which sets rules for the single market, needs new governance mechanisms to deal with the fact that the 17 eurozone countries would in effect have a blocking vote on all rules.

“The governance and voting arrangements for the EBA clearly need to change,” Mr Elderfield will tell an audience at Bloomberg’s UK headquarters. “It would be unfortunate if the ‘ins caucus’ sought to agree a common position on matters before engaging in debate around the EBA table.”

His call marks one of the first times that a top official from a eurozone country has spoken out in a debate that has largely consisted of the UK demanding concessions from France and Germany. In some ways it reflects Ireland’s bridge position as a eurozone member whose financial services sector draws a large share of its business from the UK.

Indeed, Mr Elderfield will warn both sides not to impose barriers on capital flows, citing the ECB’s “unfortunate” demand that euros be cleared by an institution within the euro and the UK’s tougher demands for local liquidity and capital for London branches of EU banks.

In an interview with the FT, Mr Elderfield said one of the potential strengths of the proposed European banking union was that it would create some distance between regulators and the banks they regulate.

“A banking union can bring a bit of detachment, perspective and insulation to regulation,” he said, “if you create more distance from the firms that you supervise and you get more insulation from local political pressures.”

Mr Elderfield, a Briton, became the first foreigner to hold the post of Irish financial regulator when he was appointed in October 2009, in the wake of a banking crisis caused by reckless lending to property developers. He said his status as an outsider in Ireland had helped him restructure the office of the financial regulator and rebuild its reputation.

His experience in Ireland, where the sheer scale of bank recapitalisation forced the country to seek a rescue from the EU and International Monetary Fund, also informs his decision on Monday to insist that banking union will be ineffective unless the ECB can use money directly from the EU to aid ailing banks, rather than having to rely on countries that are already overstretched.

“It is a distinctly unpleasant situation to be asked to put out a fire, but to find your fire extinguisher is half full – and that the only way to get a re-load is to increase debt and austerity,” he said.

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