Monday

13th Jul 2020

Expert group likely to suggest new EU bank watchdog

A report out on Wednesday (25 February) will likely call for the setting up of a new European agency to regulate financial institutions within the EU.

It "will call for deep institutional change" predicts Karel Lannoo, chief executive officer with the Centre for European Policy Studies, a Brussels based think-tank. The chair of the CEPS board, Onno Ruding, sits on the group tasked with issuing the report.

Read and decide

Join EUobserver today

Support quality EU news

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

... or subscribe as a group

  • How best to keep an eye on financial institutions will form the basis of the group's report (Photo: European Commission)

Mr Lannoo, who specialises in the field of financial regulation, said the report would call for a "single agency modelled on the European Monetary Institute of 1992 ... to lay the basis for the creation of a new European system of financial supervisors."

The European Monetary Institute was the forerunner to the European Central Bank and encouraged co-operation between member-state central banks ahead of the creation of the ECB.

The group drafting the report is headed by former International Monetary Fund chairman Jacques de Larosiere. It was mandated last October by commission President Jose Manuel Barroso to devise ideas for a new financial regulatory framework for Europe.

While a number of ECB board members have suggested over the last month that they would be happy to take on a regulatory role in addition to their existing inflation-fighting tasks, the report is likely to suggest that the new agency be separate from the ECB.

A commission spokesperson said on Monday that the group was still working on the final draft. "They are working late nights on this," the official said. It is "extremely complicated."

Struggle ahead

However, Mr Lannoo feels that the chances of EU leaders agreeing on a European solution are slim, pointing to comments made by EU leaders from the major economies at a mini-summit held in Berlin on Sunday that was supposed to cobble together a common front of the European G8 members heading into the April G20 meeting on the global economic crisis in London.

"If you look at the content of what they were saying, no one referred at any point to the Larosiere group or European structural reform. It's all the IMF and global solutions. No one said specifically we need a European answer."

"Certainly the Larosiere report will meet with a very hard fight," he continued.

Speaking in the European parliament earlier this month however, Czech finance minister Miroslav Kalousek stressed that the EU should not wait for a global solution.

Comments made by Czech Prime Minister Mirek Topolanek, in Berlin in his country's capacity as current holder of the six-month rotating EU presidency, to AFP reporters during his flight home also suggest that despite the unified front at Sunday's meeting, large divisions still exist between different member states.

The EU is home to 57 per cent of global banking assets, the highest stake held by any one region. Likewise, the largest 45 cross-border financial institutions in the EU hold over 70 per cent of deposits in the 27-country bloc.

Current regulation of the financial sector within the EU is carried out at national level by local authorities. Some co-ordination between these authorities is carried out by colleges of supervisors made up of national regulatory officials.

However, decisions made by these colleges are non-binding and current regulation of the sector is extremely heterogeneous, varying from state to state.

"Subsidiarity says you should only act at the European level if it cannot be done better at the national level. In this case you can achieve much better supervision at the European level," says Mr Lannoo.

Expert group members include Lehman, Citibank big-wigs

Critics of the EU do not need to look as far as the impending squabble at council level regarding the group's report.

Instead they point to the Larosiere group as a simple continuation of a financial regime of greedy bankers and inefficient regulators that led to the financial crisis in the first place.

The group is made up of eight members, including the chairman. Of these, Rainer Masera is a former managing director and chairman of Lehman Brother's financial institutions group in Italy. Onmo Ruding is a former vice-chairman of Citibank and Sir Callum McCarthy is the former chairman of the Financial Services Authority in the UK.

The group's concentration of banking bigwigs - in many quarters viewed as the very individuals responsible for the mess - will likely upset some of the sectors hardest hit by the crisis.

At the same time however, others will argue that it would be hard to come up with a similar group with the necessary financial experience that did not include bankers.

The report will likely form an important part of the commission contribution to the European council meeting on 19-20 March.

Depending on its reception there, some components may yet make it to the G20 table on 2 April.

Michel lays out compromise budget plan for summit

Ahead of expected tense discussions next weekend among EU leaders, European Council president Charles Michel tries to find common ground: the recovery package's size, and grants, would stay - but controls would be tougher.

EU forecasts deeper recession, amid recovery funds row

The economies of France, Italy and Spain will contract more then 10-percent this year, according to the latest forecast by the EU executive, as it urges member state governments to strike a deal on the budget and recovery package.

EU plans tougher checks on foreign takeovers

The EU and its member countries are worried that foreign powers, such as China and its state-owned companies will take advantage of the economic downturn and buy up European firms

Vestager hits back at Lufthansa bailout criticism

Commission vice-president in charge of competition Margarethe Vestager argued that companies getting large capital injections from the state during the corona crisis still have to offset their competitive advantage.

News in Brief

  1. Citizens' perception of judicial independence drops
  2. Irish finance minister voted in as eurogroup president
  3. Italy's League party opens office near old communist HQ
  4. 'Significant divergences' remain in Brexit talks
  5. Germany identifies 32,000 right-wing extremists
  6. WHO to hold probe of global Covid-19 response
  7. China accuses Australia of 'gross interference' on Hong Kong
  8. EU to let Croatia, Bulgaria take first step to join euro

EU forecasts deeper recession, amid recovery funds row

The economies of France, Italy and Spain will contract more then 10-percent this year, according to the latest forecast by the EU executive, as it urges member state governments to strike a deal on the budget and recovery package.

Stakeholders' Highlights

  1. UNESDANext generation Europe should be green and circular
  2. Nordic Council of MinistersNEW REPORT: Eight in ten people are concerned about climate change
  3. UNESDAHow reducing sugar and calories in soft drinks makes the healthier choice the easy choice
  4. Nordic Council of MinistersGreen energy to power Nordic start after Covid-19
  5. European Sustainable Energy WeekThis year’s EU Sustainable Energy Week (EUSEW) will be held digitally!
  6. Nordic Council of MinistersNordic states are fighting to protect gender equality during corona crisis

Latest News

  1. EU 'in-person' summit plus key data privacy ruling This WEEK
  2. Let's have positive discrimination for EU stagiaires
  3. We need to do more for our small and medium-sized enterprises
  4. Romania's virus surge prompts queues and new worries
  5. Michel lays out compromise budget plan for summit
  6. Border pre-screening centres part of new EU migration pact
  7. EU 'failed to protect bees and pollinators', report finds
  8. MEPs give green light to road transport sector reform

Join EUobserver

Support quality EU news

Join us