Reform of the EU Financial Stability Framework

Abstract

As highlighted by the previous chapters, the global financial system has seen an era of enormous transformation over the last few decades. The rapidly accelerating financial integration has forced both financial regulators and market participants into uncharted territories holding myriads of unexpected new challenges. This work has mainly concentrated on one aspect of those developments, namely the continuously growing significance of cross-border financial groups and the supervisory implications of this phenomenon particularly in the insurance sector. A review of the different approaches to group supervision taken by European insurance legislation over the past decades led to the conclusion that the current group supervisory framework employed under Solvency II has gone quite far in accommodating this trend. At the same time, however, it was also emphasized that the GSR’s adoption would mean a significant further improvement of those arrangements provided that a supportive regulatory and supervisory framework is created to guarantee the safe functioning of this proposed capital management tool. The foregoing chapters likewise acknowledged that the establishment of such a framework would require similar reform measures to those undertaken in the banking sector by the recently implemented Banking Union package, and demonstrated how far-reaching structural changes this would ideally entail in EMU’s present governance system. Against this backdrop, this concluding chapter discusses possible, Banking-Union-inspired reform measures in the EU’s insurance and wider financial regulatory and supervisory framework to create the prerequisites for the GSR’s safe functioning, although—as will be shown below—these measures are equally important to contribute to the greater good of promoting lasting financial stability in Europe.