EU financial watchdog should encourage cooperation but not subjugation
Posted, February 25, 2009 @ 16:00
An EU-wide financial watchdog may add value by acting as a surveillance and early warning system that coordinates Europe's response to the financial crisis, but its powers should be advisory, John Purvis MEP, Conservative vice-chairman of the European Parliament's economic and monetary affairs committee, said today.
The European Commission has today unveiled recommendations by Jacques de Larosiere on the future of EU financial supervision. Among the proposals is a new "European Systemic Risk Council" (ESRC) to be chaired by the European Central Bank, and a European System of Financial Supervisors (ESFS) which would better coordinate the EU's national watchdogs.
De Larosiere also recommends accounting reforms, stricter capital requirement rules for banks and extension of regulation to the parallel banking system i.e. hedge funds, OTC products.
Mr Purvis said:
"The devil will be in the detail of these recommendations.
"While a macro-economic early warning and advisory body may have some benefits for staving off future financial crises, it must not use streamlining supervision as a cover for grabbing more power from national regulators. However, national supervisors need to cooperate and coordinate fully, especially in the case of trans-national institutions such as banks or insurers operating in several countries.
"The ESRC should have powers to name and shame countries with inadequate measures, but it should stop short of powers to intervene.
"Greater transparency and prudence in the financial markets should be stressed by the European Commission but we must never forget that we live in a global economy and overzealous interventionist reactions could be detrimental to our international competitiveness.
"The EU is already heavily involved in updating legislation on bank capital requirements, credit rating agencies and accounting reforms. Does this put these processes in question? We have to await the detailed conclusions of the European Council and the G20, which will flesh out the next steps.
"We must, at all costs, be careful not to endanger the international competitiveness of the EU's financial services industry and the economic recovery in which it inevitably must play an important role."