Friday

29th Mar 2024

Report cites need for eurozone central regulator

  • MEPs are currently looking at measures to regulate credit rating agencies (Photo: Wikipedia)

An Organisation for Economic Cooperation and Development (OECD) report published Wednesday (14 January) cites the need for centralisation of financial regulation in the euro area.

In a televised interview, senior OECD economist and head of the EU desk, Nigel Pain, said one way to achieve this aim "is to have an agency which oversees the work of the existing national supervisors."

Read and decide

Join EUobserver today

Get the EU news that really matters

Instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

"A second way would be to set up a central agency with responsibility for actually supervising the large [financial] institutions directly", Mr Pain continued, referring to the increased number of cross-border institutions that have sprung up in recent years.

Financial regulation in the European Union is predominantly carried out at the national level at present but analysts point to the borderless nature of international finance as a reason for supranational regulation.

"The existing system relies heavily on close co-ordination and information sharing between different regulators. It also imposes a considerable burden on cross-border firms that have to report to an array of different authorities", says the OECD report.

"A more centralised and uniform system for supervising large complex financial institutions would also have advantages by pooling information, regulating in a consistent way, enhancing preparedness for a crisis and reducing regulatory costs", the report continues.

European Central Bank (ECB) chief Jean-Claude Trichet said last week the bank was examining the possibility of an increased role in this area.

The existence of large member states such as Poland and the UK outside the eurozone may limit the ECB's options however.

In the interview, Mr Pain also said short-term measures were necessary to prevent future financial crises, including increased transparency of financial accounts and a reassessment of the role played by credit rating agencies.

The European Parliament is currently looking at measures regarding credit rating agencies put forward by Internal Market Commissioner, Charlie McCreevy.

Calls for further rate cut

The OECD report says growth will not move above trend rates until the second half of 2010, and is predicting that the fiscal deficit for the euro area in 2009 will increase by 0.8 per cent.

Ageing and healthcare costs were cited as the major obstacles to long-term fiscal sustainability.

Regarding interest rates, Mr Pain said: "The ECB has to stand ready to ease monetary policy as inflation falls and we think they have plenty of scope to do so."

Such calls are likely to increase pressure on the ECB board to cut interest rates when it meets Thursday (15 January).

However, Mr Pain said the ECB should be ready to increase rates if inflationary risks increase.

'Swiftly dial back' interest rates, ECB told

Italian central banker Piero Cipollone in his first monetary policy speech since joining the ECB's board in November, said that the bank should be ready to "swiftly dial back our restrictive monetary policy stance."

Opinion

EU Modernisation Fund: an open door for fossil gas in Romania

Among the largest sources of financing for energy transition of central and eastern European countries, the €60bn Modernisation Fund remains far from the public eye. And perhaps that's one reason it is often used for financing fossil gas projects.

Latest News

  1. Kenyan traders react angrily to proposed EU clothes ban
  2. Lawyer suing Frontex takes aim at 'antagonistic' judges
  3. Orban's Fidesz faces low-polling jitters ahead of EU election
  4. German bank freezes account of Jewish peace group
  5. EU Modernisation Fund: an open door for fossil gas in Romania
  6. 'Swiftly dial back' interest rates, ECB told
  7. Moscow's terror attack, security and Gaza
  8. Why UK-EU defence and security deal may be difficult

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Join EUobserver

EU news that matters

Join us