Thursday

22nd Oct 2015

Europe seals deal on financial supervision

  • MEPs gave their final approval to the package on Wednesday after earlier reservations (Photo: EUobserver)

MEPs have backed a package of EU legislative proposals on financial supervision, the final approval needed for the 27-member bloc to set up a new system of financial watchdogs, designed to guard against a repeat of the recent financial crisis.

Sitting in plenary in Strasbourg on Wednesday (22 September), the euro deputies passed the new legislation by a large majority after months of political wrangling with member states, primarily the UK, which proved less keen on the new EU-level bodies due to fears they could impinge on national sovereignty.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

"This is a historic watershed moment," Belgian finance minister Didier Reynders said before the vote. As holders of the EU's rotating presidency, Belgian officials have been conducting difficult talks with representatives of the European Parliament over the past few months in a bid to narrow their differences.

Following proposals from the European Commission, member states reached a political agreement last December, but MEPs were quick to voice their opposition, brandishing the deal as overly watered-down and riddled with vetoes.

Wednesday's vote on a compromise text means three new European Supervisory Authorities (ESAs) will start work in January next year, co-ordinating national supervisors in the areas of banking, pensions and financial markets.

Part of their role will be to improve the flow of information between national regulators, after the financial crisis in 2008 exposed the vulnerability of national financial systems to the collapse of large cross-border firms.

"Europe will now have a supervisory model that is adapted to its needs. You have to remember that half the banks in Europe come from other states," said EU financial services commissioner Michel Barnier.

A European Systemic Risk Board will monitor for the build-up of risks in the EU financial system as a whole, and will issue 'recommendations' whenever it detects a threat such as a housing or stock market bubble.

Its will be headed by the European Central Bank chief for the first five years, after which arrangements will be reviewed.

Implications

Under the final deal, the ESAs will get powers to settle disputes among national financial supervisors if they fail to agree on a cross border issue, such as the Fortis bank collapse in 2008 which saw arguing between the Netherlands and Belgium delay the rescue operations.

They will also be able to impose temporary bans on risky financial products and activities, as well as propose the setting up of new Europe-wide technical standards in the different areas.

If national supervisors fail to act, then the new bodies in theory can also impose decisions directly on financial institutions in extreme cases, although it remains to be seen how this will work.

"The new regulators must be responsible," cautioned centre-left MEP Peter Skinner who championed strong powers for the pensions authority and steered the legislation through parliament.

In general however, MEPs did not win the power for the authorities to directly supervise banks and other financial players, leaving that task to national regulators, although a review after three years could see the ESAs' powers grow.

Parliament's call for all three authorities to be located in Frankfurt close to the European Central Bank was also shelved in the final compromise.

Instead, the European Banking Authority (EBA) will be based in London, and a European Securities and Markets Authority (ESMA) in Paris, with only the European Insurance and Occupational Pensions Authority (EIOPA) set up in Frankfurt.

News in Brief

  1. UN accuses Czech Republic of 'systematic' violations of migrants' rights
  2. EU Court: bitcoin exempt from sales tax like other currencies
  3. London is best city for start-ups, EU ranking says
  4. Auditors: Four countries sabotaging EU timber policy
  5. Bank of England: EU makes UK economy more dynamic
  6. Romania charges ex-president for 'crimes against humanity'
  7. Commission wants euro states to join forces at IMF
  8. Starbucks and Fiat tax deals illegal, EU says

Stakeholders' Highlights

  1. CESIPublic Sector Needs More Support to Manage Migration
  2. EJCSuspend UNRWA Funding Until Employee Incitement Ends
  3. OxfamLarge-scale Tax Avoidance by Starbucks & Fiat: the EU Must Now Act on Tax Dodging
  4. ACCA2015 Edition of the Robin Cosgrove Prize: Sense of Urgency for “Ethics in Finance”
  5. EFAParticipates at the SNP National Conference in Aberdeen
  6. ICRDAid for war-torn communities in Lugansk and Donetsk stepped up as winter looms
  7. Dialogue PlatformThe EU & Systematic Human Rights Violations in Turkey
  8. World VisionEU Should Ramp Up Its Refugee Response - Lives at Stake as Winter Nears
  9. Access NowFive things you should know about the EU-US Umbrella Agreement
  10. World VisionEurope Urged to Do More to Halt Central African Republic’s Slide Into Chaos

Latest News

  1. EU battle for open Internet rules rages on
  2. EU data chiefs failed to report privacy complaints to US
  3. EPP calls for Dublin overhaul and hotspots outside the EU
  4. That time again: Science vs. industry on EU fish quotas
  5. Erdogan's EU victory wins fans among Turks in Germany
  6. Balkan summit highlights Juncker-Tusk leadership gap
  7. Ship captain to launch migrant sea rescue mission
  8. Commission proposes single euro seat in IMF