Brussels, 28/01/2010 (Agence Europe) - Jacques De Larosière, the president of the expert group advising the European Commission in the preparation of its legislative package on financial supervision, is satisfied that the Ecofin Council political agreement on this dossier approves “most of the recommendations” made by the group. These call for the setting up of a European Systemic Risk Council (ESRC) in charge of providing warnings about risk to financial stability and the creation of three European financial supervisory authorities (ESAs) in the banking, insurance and real estate sectors. During a public hearing organised on Wednesday 22 January by the economic and monetary affairs committee at the EP, Jacques De Larosière, praised the promptness with which these reforms are being introduced. The former director of the French central bank, however, expressed his disappointment at the compromise limiting the ESA's binding powers, “particularly with regard to mediation between national supervisors”. He added that this was not an efficient way of making the internal market work. Nonetheless, he understands that the member states in the Council are outlining an emergency situation because they are the ones that have budgetary sovereignty.
The president of the Financial Stability Forum (FSF), Mario Draghi, shares the doubts expressed by De Larosière. He wanted to know in what respect the ESAs' recommendations would be efficient if they do not have a sufficiently binding power. Speaking on behalf of the Spanish central bank, Jose María Roldán Alegre praised the gradual but not revolutionary development of the legislative initiative. According to the latter, implementation of uniform rules is certainly very important but that does not constitute a means of reaching the objective of creating a common supervisory culture. The director of the Belgian national bank, Peter Praet, said it was urgent to finalise the reform processes by respecting the 2011 deadline date. He expressed hope that there would be a “symbiotic relation” between macro and micro-prudential financial supervisory levels and modalities for exchanging information in this context, which were crucial. Mr Draghi informed Sylvie Goulard (ALDE, France), who asked about the need to look at a structured relationship between the FSF and the European Systemic Risk Council, that pragmatism was required: yes, if this formalising of relations increases co-operation but no if it just adds yet another administrative layer. The president of the European insurance forum, Henri de Castries, would like insurance expertise to be better represented in the ESRC, with the post of vice presidency, for example. Sebastian Dullien, from the Berlin University FHTW, spotted a problem in the decision-making system at the ESRC, with no less than 33 members having the right to vote. He pointed out that central banks dominated the situation and this tended to lead to tunnel vision. He also pointed to a potential conflict of interest between the European Central Bank (ECB) and the ESRC if a systemic risk arose from the direct competencies of central bankers in the area of interest rates.
With regard to the question of the supervision of financial institutions, Arlene McCarthy (S&D, United Kingdom) asked whether it would be possible to define in advance the parameters characterising emergency situations. Mario Draghi pointed to the payments received by stockbrokers, in this respect, just before the financial crisis, which was completely out of kilter with historical averages on pay. The British bank Northern Rock, would not have figured on the list of systemic institutions at risk, explained de Castries. The drafts from the EP report on the financial supervision package will be finalised at the end of next week. (M.B./transl.fl)