European System Of Financial Supervisors Research Articles

Domestic politics and national differences in restructuring EU financial supervision

ABSTRACTWhen the 2007/2008 financial crisis hit the European Union's (EU) financial system distinct flaws of the pre-existing architecture of financial market supervision were exposed. In order to mitigate the impact of the crisis on its member states and to prevent recurrence, widespread calls within the EU arose about the need to revise the existing framework and adopt a new system of financial supervision. This new supervisory structure, known as the European System of Financial Supervisors (ESFS), started operating on 1 January 2011. Despite the fact that European countries’ responses towards the necessity to reform EU financial supervision converged, they however fiercely debated this issue which resulted in considerable discordant national policy positions towards the precise role and structure of the ESFS. This article investigates this empirical puzzle thereby focussing on the European Supervisory Authorities (ESAs). Following the societal approach to governmental preference formation it is argued that governmental positions are shaped by domestic material interests and societal ideas, and in order to remain in office these are prone to be responsive to domestic sources. This argument will be examined in a cross-country comparison through an analysis of the national policy positions of Germany and the United Kingdom.

Правовой статус механизмов контроля финансового рынка в Европейском Союзе – избранные ограничения

In the article taken analysis of character of supervisory instruments was as part of uni-form financial markets
 the EU applied by EU organs of the supervision. To the end of 2010 the supervision of financial markets
 constituted the control domain of Member States in the financial, procedural and organizational aspect.
 At present European Sys-tem of Financial Supervisors (ESFS) and organs acting in his structures of the
 EU su-pervision have a right to issuing decisions of superintendents directly binding supervised entities,
 that is organs of the supervision and financial institutions acting on the market. A possibility of drawing
 up by European Supervisiory Authorities (ESA) is a special standard solution of projects binding technical
 standards (BTS) being subject to approving by the European Commission and having a power of direct
 being applicable in all Member States.

Governance of the Single Supervisory Mechanism: Some Reflections

Since the inception of the Euro, European policy makers have been increasingly recognizing the ‘efficiency’ gaps in EU financial supervision against a background of a decentralized institutional architecture for re gulation, supervision and financial stability. Recognition of this gap had led to tangible efforts to capture some of the potential efficiency gains through legally binding mechanisms and policy coordination mechanisms (i.e. European System of Financial Supervisors –ESFS-). That ongoing iterative process of cooperation and coordination can be interpreted as having already internalized some of the EU´s potential negative externalities of cross border banking (Nieto and Schinasi, 2007). Nonetheless, the first global financial crisis since the Euro´s inception has highlighted the limitations of the decentralized approach not only for prudential supervision but also for bank resolution and its financing. In the face of the twin banking and sovereign crisis in some Euro area countries, heads of state government representatives agreed on the Single Supervisory Mechanism (SSM) involving the European Central Bank (ECB) for banks in

The European System of Financial Supervisors: Interaction with Actors at Member State Level

In the wake of the 2008 financial crisis and in the midst of the sovereign-debt crisis that hit some Eurozone countries, the banking and financial sector is experiencing a period of unprecedented regulation. This paper aims to provide a perspective on the effects of the European System of Financial Supervisors on the regulatory landscape in an EU Member State like Austria. Finally, a brief evaluation of the efficiency of the measures taken is briefly evaluated.

The European System of Financial Supervisors: Interaction with Actors at Member State Level

The European System of Financial Supervisors: Interaction with Actors at Member State Level

How Feasible Is the Proposal for Establishing a New European System of Financial Supervisors?

The impact of the global financial crisis underlined the serious deficiencies in the architecture of financial supervision in the European Union (EU). The necessary reform in the financial sector is in progress and foresees the establishment of a brand new EU-wide administrative network – the European System of Financial Supervisors (ESFS). This article critically examines the legislative proposals for the reform, more specifically the legal basis for the establishment of the network, the envisaged powers of the participants in the network, and the network’s mechanisms of operation. Based on this analysis, it is asserted that serious constitutional challenges preclude the establishment of the new network while inconsistent drafting would adversely affect its functioning.

Cross-Border Resolution of Failed Banks in the EU: Search for the Second-Best Policies

The response to failures of transnational banks within the European Union (EU) has been distinctly national. The EU institutional framework for cross-border bank resolution proved too weak to sustain coordination and prevent open intergovernmental conflicts. This paper summarizes reasons for this failure and reviews structural, political and legal constraints restraining acceptability of various reform alternatives within the EU. The first-best solution would be either a development of an EU-level bank resolution regime for cross-border banks or turning the transnational banks into a string of independent national subsidiaries backed by national resolution regimes. However, both of these alternatives would require amendments of fundamental EU treaties and they face strong opposition from various stakeholders so they are unlikely to be acceptable in the Council and European Parliament. Ultimately, the introduction of a new governance mechanism is the most likely EU response to the failure of the cross-border resolution regime. The emerging governance arrangements rest on newly created European System of Financial Supervisors and ex ante burden sharing arrangements prepared by the new colleges of supervisors overseeing about 40 of the systemically important financial groups in the EU. The banks are likely to be drawn into the new framework by an obligation to prepare ex ante resolution plans ('living wills'). The new governance arrangements represent a politically feasible second-best solution, as they increase the likelihood that the cooperation will be sustained in crisis, while not impinging on the fiscal sovereignty of member states or restraining the internal market freedoms.

Global and Regional Financial Regulation: The Viewpoint of a European Securities Regulator

Abstract This article gives an overview of the efforts, worldwide and on a regional, that is, European, basis for introducing more effective and better harmonised financial regulation. Recent initiatives, especially the work of the G20 and the creation of the Financial Stability Board (FSB), indicate greater interest in worldwide coordination of financial regulatory intervention. The financial crisis has however dealt a serious blow to the previously existing international dialogue, and a fear exists that the main regulators may withdraw to their national battlefields. Major changes in the supervisory architecture are planned in the European Union: a more detailed coordinated app-roach to regulation and to monitoring the application of existing regulations is proposed by creating a European System of Financial Supervisors. A European Systemic Risk Board will also be introduced. These and comparable changes in the US may contribute to reactivating the regulatory dialogue. The core challenge remains that of effective application of the agreements, both at the regional and the international level, and there is no ready answer to this. Policy Implications • International and local regulation should be coordinated. • Regulators should coordinate better, as markets are international, and regulatory arbitrage may undermine effectiveness. • Macro and micro supervision have to be integrated without losing their specificity. • The present cooperation mechanisms have been conceived for fair weather. • Adequate instruments have to be developed to deal with a financial crisis, at both regional and international levels.

The EU Financial System under the Global Financial Crisis

The severe recession in the EU economy after the September 2008 Lehman shock was caused by vulnerability in the EU financial systems. Why did the problems in the US mortgage market explode throughout Europe? Were there any deficiencies in the EU financial regulatory and supervisory system? These problems should be solved within the framework of the EU integration studies.To tackle these problems, sections I and II of this paper consider these issues by focusing on problems the EU financial institutions faced prior to the financial crisis. The present regime of EU financial institutions was established through (1) domestic consolidation during the 1992 Internal Market period, (2) cross-border consolidation during the 1999 Monetary Integration period and (3) the one way entry into emerging markets through EU enlargements in 2004 and 2007. This paper focuses on how the financial institutions reacted to the new environment of historically low profitability in the first half of the 2000s, and divides the banks into two groups according to their business strategy for higher profitability: (1) Some banks attached greater importance to the so called “trading book” business, which is associated with the “Shadow Banking System” in the US. (2) Other banking groups expanded their branch network, i.e. “banking book”, throughout the new EU member states.Sections III and IV describe the global financial crisis by distinguishing between its two phases. PhaseIwas the “trading book crisis” period when risks that had accumulated during the worldwide “excess liquidity” environment gradually materialized after 2006 and finally exploded in September 2008. In the current post-Lehman shock Phase II, the EU economy faces a traditional “banking book crisis” due to the accumulation of non-performing loans.The issues concerning the EU financial regulation and supervision are reviewed in section V. The present crisis can be described as the first truly pan-European financial crisis since the decentralized system of EU financial regulation and supervision was established in 1992. In the face of such a challenging environment, there has been significant progress in EU financial regulation laws. Also concerning financial supervision, both the ESFS (European System of Financial Supervisors) and the ESRB (European Systemic Risk Board) have been established. The global financial crisis has thus urged the EU to establish a more integrated financial regulatory and supervisory system.

Global and Regional Financial Regulation, the Viewpoint of a European Securities Regulator

This paper gives an overview of the efforts, worldwide and on a regional i.e. European level basis for introducing more effective and better harmonised financial regulation. Recent initiatives especially the work of the G 20 and the creation of the Financial Stability Board (FSB) indicate greater interest for worldwide coordination of financial regulatory intervention. The financial crisis has however dealt a serious blow to previously existing international dialogue, and the fear exists that the main regulators would withdraw on their national battlefields. Major changes in the supervisory architecture are planned in the European Union: a proposal has been tabled to introduce a coordinated approach to regulation and to monitoring the way existing regulations are applied by putting into place a European system of Financial Supervisors. At the same time a new European Systemic Risk Board will be created. These, and comparable changes in the US may contribute to reactivate the regulatory dialogue.

Will they Sing the Same Tune? Measuring Convergence in the New European System of Financial Supervisors

"Volume 2009 (2009): Issue 142 (Jul 2009): Will they Sing the Same Tune? Measuring Convergence in the new European System of Financial Supervisors" published on 01 Jul 2009 by International Monetary Fund.

Regulating Credit Ratings in the European Union: A Critical First Assessment of Regulation 1060/2009 on Credit Rating Agencies

In the wake of the global financial crisis, the European Parliament and Council Regulation 1060/2009 on Credit Rating Agencies has recently been published in the Official Journal of the European Union. With this Regulation the European Union takes a first step in addressing calls for a better regulation of the (global) financial markets including, among other things, overall improvements in the rating process of Credit Rating Agencies. According to some analysts, such as the Financial Stability Forum, poor credit assessments of complex structured credit products by Credit rating Agencies contributed to both the build-up and the unfolding of the financial crisis. This contribution offers a first critical comparative examination of Regulation 1060/2009 against the background of the previously applicable regime under the non-binding IOSCO Code of Conduct for Credit Rating Agencies. In doing so, answers are sought to the question whether and to what extent the introduction of the envisaged regulatory framework has the potential to result in a more effective and efficient oversight over the activities of Credit Rating Agencies in the European Union. A certain degree of scepticism may be called for, as the Regulation fails to address some important shortcomings of the present system, while the value added of the regulatory framework may not necessarily outweigh its risks. In this context also the implications for this Regulation of the recent proposals of the European Commission to create a European System of Financial Supervisors as part of an effort to strengthen financial supervision in Europe are addressed.

Will They Sing the Same Tune? Measuring Convergence in the New European System of Financial Supervisors

In June 2009 a new financial supervisory framework for the European Union (EU) was endorsed, consisting of a macro- and a micro-prudential pillar. The latter is composed of a Steering Committee, a supranational layer and a network of national supervisory authorities at the bottom, de facto establishing a complex multiple principals-multiple agents network. This paper focuses on the network of national agencies. Starting from an analysis of supervisory architectures and governance arrangements, we assess to what extent lack of convergence could undermine efficient and effective supervision. The main conclusion is that harmonization of governance arrangements towards best practice would better align supervisors' incentive structures and, hence, be beneficial for the quality of supervision.

Should Banking Supervision and Monetary Policy Tasks Be Given to Different Agencies?

This paper adds some new arguments to the thesis that the responsibility for banking supervision should be assigned to an agency formally separated by the Central bank. We also provide some additional evidence on the macro and microeconomic performance of OECD countries whose banking systems are classified according to the regulatory regime in place. We find that the inflation rate is considerably higher and more volatile in countries where the Central bank acts as a monopolist in banking supervision. Besides, although banks seem to be more profitable when Central banks supervise them, they incur into higher costs and rely more on deposits with respect to more sophisticated liabilities as a funding source. The data are not defintively in favor of functional separation. However, we argue that the evolution of financial intermediaries, moral hazard problems and especially cost accountability seem to suggest that separation would be a better solution for industralized countries. We also critically discuss the current arrangement of financial regulation and supervision in the EMU: our proposal is to establish an independent European System of Financial Supervisors (ESFS) structured similarly to the ESCB.