The EU can establish a new financial management

25.02.2009

Working Group under the leadership of ex-heads of the Bank of France, Jacques de Larozera may recommend to the European Commission to create two new agencies that would regulate the activities of financial institutions in Europe, reports Reuters.

Draft report of the commission, which has been available to the agency, says that the EU financial regulation has been too weak and needs urgent strengthening.

"Need to establish a European system of financial supervision. This body should be decentralized," - write the authors of the report.

Existing supervisory authorities at national scale may continue to monitor the daily activities of financial institutions.

The authors of the report also recommends the creation of the European Council on systemic risk, under the leadership of the European Central Bank, which will include representatives of bodies that monitor the activities of banks, insurance companies and stock exchanges. It will collect and analyze information, important from the standpoint of financial stability.

The EU has asked a working group under the leadership of ex-heads of the IMF, Jacques de Larozera to propose measures to reform the work of regulators, the need for which became apparent during the financial crisis.

Attempts to establish regulatory bodies at the EU for many years been blocked due to the reluctance of countries to transfer control of the key players of their financial markets.
Major banks were in favor of the simplification of supervisory activities in connection with the high cost of reporting in all countries where they operate.

Legislators and government officials suggest that Larozer offer to create some institution, which then, after changing the core of the EC Treaty, can be transformed into the main body of financial regulation at the EU.

The model to be emulated can be a European Monetary Institute, which later evolved into the ECB. This is a compromise which, on the one hand, would abandon attempts to patch holes in the old and the weak system of financial regulation, and on the other hand, eventually will provide a full governing body on the basis of the EU.