EU proposals for three new financial watchdogs revealed

News - Banking

Written by Ray Clancy

Wednesday, 15 September 2010 09:05

The European Union has revealed its proposals on reforms in the financial sector with the creation of a European Systemic Risk Council and three new watchdogs covering banking, insurance and securities markets.

The three new watchdogs will be based in London, Paris and a German city, yet to be announced. Discussions are taking place this week to finalise the roles and the new framework is expected to be put before the European Parliament before the end of the month. It will also have to be approved by European finance minister.

The proposals mean that although the new watchdogs will have no direct supervisory powers, other than to oversee credit rating agencies, they will have some additional emergency powers to ban or restrict activities that threaten the stability of the EU’s financial system.

Such emergencies will be called by member states rather than the European Parliament or Commission, it has been suggested, and the day to day supervision of individual companies will remain the responsibility of national regulators. However, the new bodies will develop EU wide harmonised rules.

The move, which comes on the back of Wall Street reforms approved by President Barack Obama, has been widely welcomed.

‘The new framework is a crucial stage in our effort to learn all the lessons from the crises to better protect our economy and our citizens in the future,’ said European internal market commissioner Michael Barnier.

Conservative economic and monetary affairs spokeswoman and MEP Vicky Ford said that the new structures will allow better coordination of financial services supervisors across Europe.

‘It will protect consumers from cross border crises that we witnessed. At the same time national governments and national regulators keep their frontline responsibility to protect national tax payers’ interests,’ she added.