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28th May 2022

EU backs new financial regulatory framework

  • Proposals for better financial regulation form a major part of the commission's submission to the European Council later this month (Photo: European Commission)

The European Commission gave strong support for proposals on a new financial regulatory framework on Wednesday (4 March) and said their speedy implementation was crucial to restoring EU citizens' confidence in the financial sector.

"If we don't do it now, we will never to do it. We have to seize the moment. We can not defer it to the Greek calends," commission President Jose Manuel Barroso said.

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Mr Barroso made the comments as he outlined the commission's contribution to the summit of European leaders scheduled to take place in Brussels on 19-20 March.

"We need to build trust in financial markets in general. We have set out a detailed road-map today towards a European system of supervision – a system where ethics are taken into consideration."

The proposals made by a high-level group of financial experts chaired by former IMF director Jacques de Larosiere and contained in the commission's submission to the European council later this month call for a European Systemic Risk Council to be set up to gather information on threats to the EU's financial sector stability.

The Larosiere report also calls for the committees that currently oversee national banking, insurance and securities supervisors to be given tough new powers to ensure better co-ordination between the national supervisors.

The new powers would also ensure the adoption of binding supervisory standards for national regulators and require credit rating agencies to be licensed.

Nicolas Veron of the Brussels based think-tank, Bruegel, told EUobserver the Larosiere proposals in this area still "leave many important issues open."

Prior to the report's publication, there had been calls for a single regulator of financial institutions at the European level, rather than the continued regulation at the national level proposed by the Larosiere group and backed by the commission, albeit with stronger oversight bodies.

"We feel that it would be unrealistic at this stage to think in terms of one single supervisor for Europe. We would need to reform the treaties," said Mr Barroso.

"Also, some states are in the eurozone and some are not, so there would never be agreement on this," he continued.

Timetable

The Larosiere report proposed that there be a trial period of three years for the new banking, insurance and securities authorities before full implementation.

"We are suggesting that this should be done immediately [rather than after the three-year trial period]. We want this process up and running as soon as possible," said Mr Barroso.

"In April we will make proposals on hedge funds, private equity and executive remuneration," said Mr Barroso.

The commission also intends to prepare legislative proposals necessary for the increased regulation so that they can be tabled in May.

Following an impact assessment, the commission will put forward to the June European Council a detailed timetable for further measures based on the Larosiere report.

Leaders of the G20 developed and emerging nations will also discuss the issue of financial sector regulation in London on 2 April. EU premiers have held a number of meetings in recent weeks to help hammer out a unified position to take to the important gathering.

"A global crisis needs a global solution. Today we have put our proposal on the table for a European response for the G20 meeting in London. Europe will speak with one voice in London," said Mr Barroso.

However, he warned about placing too much emphasis on the meeting's outcome.

"The G20 is a forum, but it has no direct enforcement competence. That is why it is important that we at European level take decisions that are binding."

The commission's submission to the European Council later this month also urges member state to take action on the impaired assets held by a number of banks that are currently blamed for stifling credit flows.

It also highlights the dangers of rising unemployment that could reach 10 per cent in the EU next year and urges member states to increase retraining services for those out of work.

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