Porto/Brussels, 17/09/2007 (Agence Europe) - While European integration provides an opportunity for developing the financial services industry, it is also a challenge in terms of cross-border cooperation among market and investment surveillance and regulatory authorities, and therefore in terms of crisis management following the collapse of banks active in several member states. At their meeting in Porto on 14-15 September, EU finance ministers and governors of central banks discussed financial stability in Europe against the backdrop of the current turmoil on the money markets (see related article). They discussed action since the drawing up of a memorandum of understanding (MoU) in 2005 on financial crisis management and the mock disaster exercise carried out in September 2006 (see EUROPE 9362 and 8948), agreeing on nine common principles for cross-border financial crisis management.
After the meeting on Saturday 15 September, the acting president of the ECOFIN Council, Fernando Teixeira dos Santos, said they had agreed on a raft of measures put forward by the Economic and Financial Committee. The agreement, expected to be formally confirmed at the October ECOFIN Council, adds principles for cross-border financial crisis management to the MoU and the following points: the drawing up of a common analytical framework to assess the systemic impact of a financial crisis; encouraging member states to sign special voluntary cooperation agreements; improving the exchange of information among competent authorities at national level. Pleased with the agreement to shore up financial stability, Jean-Claude Trichet, the president of the European Central Bank, stressed that flexibility was required to manage crisis situations.
The ministers and governors agreed on the following nine principles for cross-border financial crisis management: 'the objective of financial management is to protect the stability of the financial system in all countries involved and in the EU as a whole and to minimise potential harmful economic impacts'; 'primacy will always be given to private sector solutions'; 'the use of public money… can never be taken for granted and will only be considered to remedy a serious disturbance in the economy and when overall social benefits are assessed the exceed the cost of recapitalisation at public expense'; 'if public resources are involved, direct budgetary net costs are shared among affected member states on the basis of equitable and balanced criteria'; 'arrangements and tools for cross-border crisis management will be designed flexibly'; such tools 'will be consistent with the arrangements for supervision and crisis prevention… particularly the division of responsibilities between authorities and the coordinating role of home country supervisory authorities'; member states that may be affected will be fully involved in crisis management and resolution; policy actions will preserve a level playing field; and 'the global dimension will be taken into account in financial stability arrangements whenever necessary'. (mb)