Brussels, 04/02/2010 (Agence Europe) - The European Parliament rapporteurs on the package of legislation to reform supervision of the financial markets in Europe, namely Sylvie Goulard (ALDE, France) on the proposal to set up a European Crisis Management Committee (CERS) along with José Manuel García Margallo y Marfil (EPP, Spain), Sven Giegold (Greens/EFA, Germany) and Peter Skinner (PES, UK) on the draft legislation to set up European Financial Supervision Authorities (EFSA) for banking, markets, and insurance, will be meeting in Brussels on Friday 5 February 2010 to fine-tune their views and settle outstanding issues in their draft reports (expected to be published next week). The MEPs want to draw up a joined-up approach and ensure progress across the board on macroeconomic and microeconomic issues alike. Their strategy is to win the backing of the four biggest political parties at the EP so the EP can put up a united front in its negotiations with the Council of Ministers and work on a par with the ministers. Since the EU Council of Ministers reached agreement in principle in December 2009 (see EUROPE 10032), the MEPs have repeatedly stated that they want the EU to react to decide on the supervision of banks active in more than one country. Close sources suggest that although the rapporteurs do not necessarily agree among themselves on matters, they are united in their desire to go beyond what the Council of Ministers is suggesting.
As suggested in the De Larosière Report, the European Commission recommended setting up a European Crisis Management Committee (CERS) to issue confidential or public warnings about risks facing too-big-to-fail banks and recommendations about how to sort out the situation. In an interview with this newsletter, MEP Sylvie Goulard stressed the importance of financial supervision being adjusted to suit the needs of an integrated Single Market and for a joined-up approach across all areas of the industry. Suggesting that the new legislation follows logically on from the creation of Economic and Monetary Union, Goulard said it should be made clear that the European Central Bank chief will head the CERS. She said that one lesson of the financial crisis was that the financial supervision circles are highly incestuous and the CERS bodies had to have a more balanced membership. This idea echoes calls for reforming the insurance and securities industries highlighted in an EP hearing recently (see EUROPE 10066). Should membership of the CERS general council be changed? A more likely option would be to open up membership of the management committee responsible for preparing for the CERS general council's work. Aware that the EU has to work with one eye on the global financial markets, Goulard wants closer ties between the EU and the global financial world, possibly by giving the CERS powers to interview financial supervisors from countries outside the EU or representatives of international organisations.
The inter-institutional battle is likely to be intense when it comes to the nitty gritty of microeconomic supervision of the world of finance. Initial moves suggest the EP is more on the side of the European Commission in this connection, whose initial draft legislation gives binding powers to European Supervision Authorities over national supervisors in the following three areas: in the event of a national authority failing to respect EU rules; in the event of disagreement between two or more national financial supervisors; and in the event of a crisis in the financial system. Under pressure from the United Kingdom, the Council of Ministers watered down the initial draft legislation to give the ESAs binding power only in the event of a national supervisor failing to respect EU rules. In their battle with the Member States, the MEPs are being backed by the Commission and the Commission President, José Manuel Barroso, has expressed disappointment at the way the Council of Ministers has compromised with the EU Commissioner-designate for the Internal Market, Michel Barnier, who told MEPs during his interview at the EP recently that he would back the European institution's initial views once he came to office.
Goulard said the EU rules had to be based on 'loyalty,' meaning that national authorities will not be allowed to refuse to cooperate with their counterparts at EU level. The EP rapporteurs want the ESAs to be given greater and more binding powers over national supervisors. They are considering having all three ESAs based in the same city in order to encourage the creation over time of a single European supervisor (an idea backed by the head of the Liberal Group). In its initial proposals, the European Commission suggested that the ESAs should be based in the cities where the three existing European committees of national regulators are currently based (the CESR in Paris - securities; the CEBS in London - banking and the CEIOPS in Frankfurt - insurance). The MEPs are now looking at how to water down the safeguard clause that would prevent ESAs from taking decisions that might infringe on national sovereignty for budget issues, for example when countries are instructed to use state funding to bail out failing banks. The Council of Ministers has given Member States greater powers to challenge ESA decisions that it feels go too far. (M.B. trans fl)