European Systemic Risk Board Research Articles

The Proposals for the European Supervisory Authorities: The Right (Legal) Way Forward?

This article deals with the proposals that have been presented by the European Commission in September 2009. These proposals aim to improve the supervision of (multi-jurisdictional) financial undertakings in the EU. We first shortly addresses some elements of the current state of affairs regarding financial services and supervision. What are the main EU-legal characteristics of the supervisory framework? What are its shortcomings (chapter 2)? Subsequently, we discuss the proposals that the European Commission and European Council have presented to further harmonise the financial supervision between the Member States (chapter 3). The EU proposes to establish three new European Supervisory Authorities (ESAs) and a so-called European Systemic Risk Board (ESRB). The ESAs will replace the so-called level 3 committees (see below).The fourth chapter will be the main chapter of this article. The originality of this contribution will be to examine to what extent the proposed European system of supervision actually fits into the current EU Treaty legal framework and into its successor, the Treaty of Lisbon. We will focus on two legal issues: 1) can the proposed legal basis for the ESAs (art. 95 EC) be justified and 2) can the future European Supervisory Authorities be entrusted with the envisaged powers? The fifth chapter concludes and contains some recommendations.

The New Financial Stability Architecture in the EU

After the introduction of the euro in 1999, the debate on the financial stability architecture in the EU focused on the adequacy of a decentralised setting based on national responsibilities for preventing and managing crises. The Financial Services Action Plan in 1999 and the introduction of the Lamfalussy process for financial regulation and supervision in 2001 enhanced the decentralised arrangements by increasing significantly the level of legal harmonisation and supervisory cooperation. In addition, authorities adopted EU-wide MoUs to safeguard cross-border financial stability. In this context, the financial crisis has proved to be a major challenge to the ongoing process of European financial integration. In particular, momentous events such as the freezing of interbank markets, the loss of confidence in financial institutions, runs on banks and difficulties affecting cross-border financial groups, questioned the ability of the EU financial stability architecture to contain threats to the integrated single financial market. In particular, the crisis has demonstrated the importance of coupling to micro-prudential supervision a macro dimension aimed at a broad and effective monitoring and assessment of the potential risks covering all components of the financial system. In Europe, following the de Larosiere Report, the European Commission has put forward proposals for establishing a European System of Financial Supervision and a European Systemic Risk Board, the latter body to be set up under the auspices of the ECB. While the details for the implementation of these structures still need to be spelt out, they should reinforce significantly – ten years after the introduction of the euro – the financial stability architecture at the EU level.

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.

Going Forward: Regulation and Supervision after the Financial Turmoil

Today, the European Council is expected to endorse significant changes to the institutional set-up for financial supervision and regulation in the European Union. Undoubtedly these are important reforms, particularly - but not only - against the background of the financial crisis that started in August 2007. While the ECB has an interest in all these reforms, in particular on the macro-prudential side, namely the establishment of the European Systemic Risk Board (ESRB).