Brussels, 03/09/2010 (Agence Europe) - The European Parliament and the Council of Ministers reached agreement in principle in the early evening of Thursday 2 September on the package of new financial supervision legislation, like the setting up in January 2011 of a European Systemic Risk Board (ESRB) and three EU supervision authorities (ESAs), one for banking, one for insurance and one for securities. The agreement now needs to be formally endorsed by both institutions, probably on Tuesday 7 September at the meeting of EU finance ministers as far as the Council of Ministers is concerned (see related article) and at the end of September for the European Parliament (at the second plenary of the month).
News of the agreement was hailed by the MEPs involved in the talks. “We have reached an ambitious deal that will protect citizens' interests. (…) 'Main street' no longer pays for the irrational exuberance of financial entities”, said José Manuel García-Margallo y Marfil (EPP, Spain). Three MEPs from the S&D Group, Udo Bullmann from Germany, Peter Skinner from the UK and Antolin Sanchez Presedo from Spain commented: “By designing this new architecture, the EU has made a huge step forward in avoiding any new financial crisis. Nevertheless, more needs to be done. We expect European leaders to show the same level of ambition in securing a deal to regulate hedge funds and private equity.”
In a joint statement, the coordinators of the main political parties at the EP's economic and monetary affairs committee, Bullmann, Jean-Paul Gauzès (EPP, France), Sven Giegold (Greens/EFA, Germany) and Sylvie Goulard (ALDE, France), explain: “The agreement on the financial supervision package foresees that through future legislation, additional supervisory powers shall be conferred on the European Supervisory Authorities. In the common market shared European infrastructures have to be subject to European supervision”. The EU internal market commissioner, Michel Barnier, is pleased that the agreement takes up most of what the European Commission initially proposed: “When the crisis hit, we did not have effective tools to act. With the new supervisory framework that we are creating, we will be equipped to face the future: - we will have the control tower and the radar screens needed to identify risks, - the tools to better control financial players, - and the means to act quickly, in a coordinated way, in a timely fashion”.
Emergencies. It will be the Council of Minsters' job to declare states of financial emergency in the future. The ESRB will have the power to make a preliminary recommendation that a state of emergency be announced. The EP would have liked to have had its role set out on paper, although there is not anything actually preventing it from making a political statement. Belgian and French Green MEPs Philippe Lamberts and Pascal Canfin regretted that the Council of Ministers had demanded the right to call a state of emergency. Quizzed by EUROPE, Sylvie Goulard, the EP rapporteur on the setting up of the ESRB, explained that she too is unhappy about this because it is crucial that the Council of Minsters “is not the only key-holder”. This is one of the reasons why she has been fighting for the president of the European Central Bank, as the least challenged authority, to chair the ESRB, at least for the first five years of the ESRB. The Commission recognises the need to adjust the details of the agreement on the question of states of emergency, a question that was not discussed on Thursday.
The European supervision authorities will replace the current committees of national regulators (CESR, CEIOPS and CEBS). The ESAs will have binding powers over national authorities, including where a national authority fails to react directly to a financial institution. These powers over national authorities come into play in the following scenarios - the infringement of EU financial legislation (over banks' capital, for example); in a crisis; and in the event of disagreement among national authorities at the College of Supervisors. In order to take effect, these powers will have to be added to financial industry legislation. In the event of crisis, ESAs will temporarily have the power to ban toxic financial products and/or short selling. Here too, the financial industry rules will have to be adjusted to make this possible. In order to ensure better application of EU rules, the ESAs will have the power to draw up technical standards. The EP would have the right to scrutinise the standards before the Commission endorses them, a procedure described by a Commission expert as “cumbersome”.
Over the next two or three years, the ESAs will recruit around a hundred members of staff. The appointment of the chairs of the committees will be open, and the EP will have the power to confirm appointment of the suggested candidate. Approved on an annual basis, some 60% of the ESAs' budgets will come from the member states, and 40% from the EU budget. Giegold commented that it was regrettable that the Council of Ministers had insisted on the illogical and inefficient idea of having the three authorities located in different cities (London, Paris and Frankfurt). The Commission is invited to examine the idea of having all three ESAs in a single location, and the idea of merging them into a single body. (M.B./transl.fl)