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EU Parl approves new supervisory architecture

Wednesday 22 September 2010 – by Nicola York

The European Parliament has today given the green light to a package of reforms which will see a overhaul of the way banks, stock markets and insurance companies are overseen from 2011.

Three European supervisory authorities will replace the current supervisory committees and their powers will be more wide-reaching.

A European Systemic Risk Board will also be established with the task of monitoring and warning about the general build-up of risk in the EU economy.

The Parliament said the new system should be able to provide better protection from events such as the Fortis Bank crisis weekend, Germany’s unilateral naked short-selling ban and the losses faced by life insurance policyholders in the UK, Ireland and Germany with the collapse of Equitable Life.

It should also strengthen the EU single market for financial services and provide much better investor protection, according to the Parliament.

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The new ESAs will get tough new powers to settle disputes among national financial supervisors and will be able to impose temporary bans on risky financial products and activities.

If national supervisors fail to act, then the authorities may also impose decisions directly on financial institutions, such as banks, so as to remedy breaches of EU law.

ESAs will also have the power to investigate specific types of financial institutions, products or activities such as naked short-selling, to assess their risks.

European Conservatives and Reformists group economics spokesman Dr Kay Swinburne MEP says: “This deal ensures that cross-border markets can be supervised by cross-border institutions who coordinate the work of national regulators. It provides the markets with a common rule book and greater certainty over the key questions of who will regulate what and where.

“Instead of handing over the keys to the City of London, this deal places it in a kind of European Neighbourhood Watch programme. Peer oversight will provide us all with loudhailer warnings when there are macro systemic or particular risks.

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