The European Parliament today approved the so-called Financial Supervision Package, the set of legislation due to create new European watchdogs to control banks, insurances, securities and markets from 1 January 2011.
"We have been able to reach an ambitious deal in record time and keep the EU’s promise that the new regulatory framework for the financial sector will be ready for 1 January 2011. It is also an ambitious legislation to protect citizens’ financial interests and is a big step for European economic integration", said EPP Group MEP, José Manuel García-Margallo, vice-chairman of the Economic and Monetary Affairs Committee of the European Parliament.
The new architecture of financial supervision in Europe will be composed by a European Systemic Risk Board (ESRB), based in Frankfurt and chaired by the European Central Bank President for the first five years, with the mission to assess and prevent potential risks to financial stability; and three independent authorities to supervise banks (based in London), insurance and pensions (based in Frankfurt) and securities and markets (based in Paris).
"This system is the main EU response for avoiding another financial crisis and will provide that the ‘main street’ no longer pays for the ‘irrational exuberance’ of financial entities", commented García-Margallo, Rapporteur on the creation of a European Banking Authority (EBA) and main negotiator of the legislative package.
"There is a very simple reason for all this new supervisory architecture. National supervisors do not have jurisdiction to control financial entities able to operate without obstacles throughout the whole European continent. We need to learn from what has happened and build a system so that in the case of a new crisis, we do not find ourselves as vulnerable as now", García-Margallo explained.
In his view, The Parliament has succeeded in accomplishing a deep change, as was proposed in the 2009 Larosière Report, and has avoided the light reform that many governments wanted at the beginning of the negotiations early this year. "There was no other solution than more Europe, as financial supervision could no longer stay in the hands of national watchdogs whose authority ends at their national borders", he concluded.
The European Parliament has also secured the success of the system with a clause that provides for a review of its functioning after three years. That will allow an assessment of whether the new authorities need more powers or if all of them should share one seat to better coordinate their tasks. Also, the Parliament will have democratic control of the system as it will be entitled to veto the appointment of the authorities’ chairmen, as well as have a say in the development of the implementing measures and standards. MEPs will regularly meet the President of the ESRB, as is the case already for monetary policy.
