29th Feb 2024

Deal reached on pan-European financial supervisors

  • MEPs lost out on a number of their key demands (Photo: snorski)

After months of tough negotiations, the three sides of the EU triangle came to agreement on Thursday on the creation of financial supervisors intended to put an end to economic crises such as those of the last three years before they appear.

The European Commission, the European Parliament and the EU member states reached a political deal to set up a European Systemic Risk Board and three separate agencies to monitor securities, banks and insurance companies.

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Internal market commissioner Frenchman Michel Barnier called the deal "a crucial milestone".

With the new supervisory bodies, the bloc will have "the control tower and the radar screens needed to identify risks, the tools to better control financial players and the means to act fast, in a co-ordinated way," he said.

The deal reached by representatives of the three sides of the European triangle must still be approved by finance ministers of the member states, who are expected to give the go-ahead next Tuesday, and the full sitting of the European Parliament, who are likely to themselves sign off later this month.

The heart of the fight had been between the increasingly self-confident parliament who feared a weak set of agencies would not have the power to correct dangers ahead, and member states, particularly Britain, who feared a loss of sovereignty in one of the most critical areas for a national government.

In the end, a compromise has delivered to member states the ability to appeal the decisions of the new bodies, something fiercely resisted by MEPs.

Another sore point was whether the president of the European Central Bank - the chief banker for the eurozone but not for all member states - should head up the new systemic risk board.

The deal reached on Thursday will indeed make the current ECB chief, Jean-Claude Trichet the boss at the new board, but only for five years, after which a new head would be negotiated once more.

In a major victory for the national capitals, it is they who will have the critical hand on the alarm bell. The member states are to be the ones to declare that there is an emergency on the cards, not the European Commission or the parliament.

Additionally, direct oversight of companies will not be performed by the new agencies, a task to be left with national supervisors. The new agencies are to only co-ordinate actions.

Finally, the parliament was also dealt a defeat in its attempt to have a unified headquarters for the four bodies. Instead of all being based in Frankfurt, they will now be located in London, Paris and the home of the ECB.

The legislation bringing all of this into affect will be reviewed in three years.

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