EU enthüllt Details von Finanzüberwachungsrevision[en] 

The financial crisis has emphasised the need for better European supervision of financial institutions, which are increasingly engaged in cross-border activities despite control remaining a national affair.

According to figures provided by the European Commission, there are over 8,000 banks in Europe, but two-thirds of their total assets are held in just over forty multinational institutions.

In February, an ad hoc high-level group, established by the EU executive and chaired by Jacques de Larosière, suggested a double-layer financial supervision to monitor systemic risks (macro-supervision) and single companies (micro-supervision).

Brussels is set to support proposals, made by the high-level group on financial supervision chaired by former IMF Managing Director Jacques de Larosière, to establish tighter regulatory supervision of cross-border financial groups in Europe.

The EU executive said it will propose in May to establish three new supervisory authorities (for banks, insurance firms and securities) with powers to enforce decisions on the oversight of financial cross-border groups in Europe (EurActiv 26/02/09).

Currently, multinational banks and insurance firms in the EU are supervised at national level or, in the best cases, by colleges of national supervisors. But there is no mechanism to decide which supervisor should prevail in the event of a dispute. As a result, watchdogs have been unaware of the collapse of huge financial groups until a few hours before they happened. 

Speaking at the European Business Summit in Brussels yesterday (26 March), Didier Reynders, Belgium's finance minister, said this is what had happened in the case of the Fortis group, which collapsed earlier this year.

A European Commission official speaking at a separate conference last week said Brussels "will go ahead" with "a binding mediation mechanism" as "a practical way to resolve disputes" between colleges of supervisors. The official admitted, however, that "there is still need for a political agreement," but that the aim was to empower the three new supervisory authorities with the mediatory role.

"The alternative would be a classic infringement procedure, which takes two years before going to court, and it is totally impractical for the way financial markets function," the official added.

The Commission will include this measure in its plan to review the European financial supervisory system, which will be published in May, before the an EU summit in June. Not all member states are likely to support such a proposal, which could strip them of crucial financial oversight over groups operating on their territories.

Moreover, many other aspects of the plan remain unclear, and are subject of negotiations within the EU, which will be also influenced by the G20 summit in April aimed at addressing supervisory issues at a global level.

The most relevant question concerns so-called 'burden sharing'. Who is going to bail-out a cross-border financial group if it fails? Which state and taxpayers will have to carry the burden? The de Larosière group did not suggest a comprehensive solution to these issues. 

Onno Ruding, a former Dutch finance minister and a member of de Larosière group, said yesterday that the issue was "a top political matter.".

The other open issue is what to do with conglomerates which offer banking and insurance services and are thus subject to diverging regulations and capital requirements. Fortis is an example of a bank-insurance conglomerate. "The model is under scrutiny," said Rainer Masera, another member of the de Larosière group.

However, the de Larosière report is vague on this matter. At present, the Commission is saying only that there is need for "strong coordination" among the three new authorities to replace existing committees on banks (CEBS), insurance firms (CEIOPS) and securities (CESR).