Green light to tighter financial oversight

EU finance ministers meeting at the Ecofin Council on 7 September backed the establishment of four European financial supervisory bodies, aimed at averting a recurrence of the financial crisis. A provisional deal had been reached with the European Parliament on 2 September.

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Under the reform, a European Systemic Risk Board (ESRB), to be located in Frankfurt, will be responsible for the oversight of the financial system within the Union. In the event of a high-level or systemic risk - one that could jeopardise the entire market - it will issue warnings and recommendations for action and monitor their follow-up. For the first five years, the ESRB will be chaired by the President of the European Central Bank, but the issue is to be reviewed after three years.

Three supervisory authorities will be created, for banking, securities and insurance, with their seats in London, Paris and Frankfurt, respectively. They replace the existing supervisory committees, which have had only an advisory role. Working in tandem with a network of national supervisors, the new authorities will be tasked with, inter alia, setting common standards and contributing to a common supervisory culture. Responsibility for day-to-day supervision of individual institutions is to remain with national authorities.

The reform, which is one of the priorities of the Belgian presidency, is subject to approval by the Parliament at its forthcoming plenary session, followed by formal adoption by the Council. The new bodies should be up and running as of 1 January 2011.

More information:
Press release (pdf)
Webcast of public debate
Webcast of press conference