Even Charlie McCreevy … Information published in our bulletin the day before yesterday (No 9827) on work in progress in the EU on governance of the financial markets confirmed that things have come to a decisive turning point and, as our heading clearly indicated, there is a lean towards the end of self-regulation of the markets. Debates are no longer on the principle of whether or not to define new rules, but rather on their content. German Secretary of State for Finance, Jörg Asmussen, has said that self-regulation is not enough and that the Community of member states must fix the principles for reform. With radical revision of a number of earlier stances, European Commissioner Charlie McCreevy has announced that the Commission will be preparing suitable initiatives for regulating not only hedge funds but also private equity funds and has recognised the need for deep reform of the Basel II agreement, pointing out its many weaknesses. A senior Commission official has stated April as the deadline for a political agreement between member states on various aspects of the necessary reforms, including that concerning financial rating agencies.
Valéry Giscard d'Estaing had earlier asserted that the system could be put back into order by this winter. He was perhaps over optimistic but the urgent need and resolve to move fast cannot be denied. The current European Parliament and the current European Commission have only a few months before them and seem determined not to waste time, each according to its own competence. In-depth technical discussions are taking place within the various specialised European bodies - as the regular accounts in our bulletin show. No-one can forget the need for a certain level of coordination (and political will) at global level. From this point of view, preparation of the next G20 is crucial and the EU plans to keep the initiative in place.
Five issues that leave Pervenche Berès perplexed. On one specific aspect, that of supervision of financial markets, the political debate is particularly intense, as this column explains in bulletin No 9826. Valéry Giscard d'Estaing considers the European Central Bank (ECB) should not only lead to restoring order in eurozone banking regulation but should also supervise the process. ECB President Jean-Claude Trichet has stated he is ready for this eventuality. Reservation and reticence are of an essentially political nature. Is it appropriate that supervision should be in the hands of an actor on the monetary policy scene? - All the more as a number of political authorities are seeking to gain influence over the ECB. Pervenche Berès, who chairs the European Parliament's economic and finance committee, explained during a meeting in Paris open to the public (the “Matinales” by the Toute l'Europe association) the five reasons for her hesitation and perplexity: a) the ECB is strong and independent; b) it would be inappropriate to mix up the functions of central bank and banking supervision; c) it would be difficult to supervise British banks by the ECB as the UK does not belong to the eurozone; d) finance ministers are generally opposed to this solution; and e) insurance companies would remain outside supervision as they do not come within the scope of ECB competence.
Alternative solutions? There are many possible alternative solutions: the creation of an independent European authority; strengthened cooperation between national authorities; separation between national operations and crossborder activity; and standardisation of current national norms and standards (which often differ from one member state to the next, for example on the question of uncovered sales of transferable securities) while keeping the national character of supervision. The so-called de Larosière group is studying the architecture for supervision in Europe and is expected to reach its conclusions towards the end of next month. The European Commission, whose task it is to possibly take the initiative of suggesting an extension of ECB competence, has not yet made its views known on this. It plans to present a “communication” in March. It has, however, already taken several initiatives concerning, for example, the powers and working of independent consultative bodies. When it comes to the power of the ECB, European Parliament's assent is in any case mandatory.
I have cited the supervision dossier, which is one of many others, as an example. The interests at stake are tremendous, but the tendency is clear - there is a leaning for more rules and more supervision.
(F.R./transl.jl)