Brussels, 17/06/2009 (Agence Europe) - The head of a group of experts advising the Belgian government on the global, European and Belgian financial supervision systems (see EUROPE 9922), Alexandre Lamfalussy, has suggested setting up an EU savings guarantee system as the first stage in creating an EU system to ensure burden sharing among member states in the event of a financial crisis arising from the collapse of a cross-border financial institution. Lamfalussy said the de Larosiere Report did not really tackle the problem of cross-border banks and burden sharing, and he therefore suggested the setting up of an EU system of savings guarantees, which would have the advantage of providing great risk diversification and ensuring fair treatment for big and small EU member states.
The Lamfalussy Report believes that Belgium, where many international financial institutions are headquartered, where there is a high household savings rate and whose banks have grown in other countries, would have a lot to gain from an EU savings guarantee system covering all 27 member states, or at least the 16 member states in the eurozone. Based on the recent review of EU Directive 1994/19/EC stipulating that the minimum guaranteed savings rate in the EU will be €100,000 by 2010, the suggested new system would be funded before a crisis broke out in order to ensure fast availability of cash and fast reimbursement of savers; be solely composed of monies provided by financial institutions active in more than one member states (depending on the risk level of their business); and be managed by an EU agency set up for the purpose. The experts also recommend the drawing up of more detailed procedures for burden sharing than set out in the Memorandum of Understanding (MoU) adopted by the April 2008 ECOFIN Council (see EUROPE 9637), and the continuation, and even the strengthening, of powers of the country hosting pan-European banks. The question of investor information and protection, banking specialisation and instruments available to the ECB would also need to be addressed. The European Commission is examining the idea of an EU savings guarantee system in a public consultation exercise that will close at the end of July 2009 (see EUROPE 9919).
Discussing the origins of the financial crisis, Baron Lamfalussy regretted the determined silence about the origin of the excess liquidities that had flooded the financial markets, namely the global monetary expansion carried out by central banks after the bursting of the dot.com bubble and serious macroeconomic imbalances (like the US deficit and the hoarding of vast foreign currency reserves by emerging economies). He described the fact that there was no real debate about the origin of this excess cash in international bodies as “dangerous” and said central banks should act closely together in this domain. Moreover, the IMF should have a crucial role to play, he said, in ensuring better detection of systemic risks to the global financial markets in the future. (M.B./transl.fl)