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BackThis week, an extraordinary meeting of the Committee on Economic and Monetary Affairs (ECON) of the European Parliament took place in Strasbourg on the fringe of the plenary session of the European Parliament. On the agenda: a first debate between the parliamentarians on the future of European financial supervision. At the same time the first storm clouds gathered in the Council – the committee, in which the European Member States are represented.
Whilst recently a public hearing convened by the newly created special committee of the European Parliament on the Finance, Economic and Social Crisis (CRIS) went further into the question about the causes of the financial crisis, experts seem to agree that the main reasons for the crisis were inadequate or non-existing regulations for the financial sector and an insufficient and uncoordinated supervision of the adherence to the existing rules.
For years, renowned experts had warned that the existing supervisory structure for financial institutions in Europe does no longer do justice to the real situation. The supervision of banks, insurance companies and securities trading is still mainly located in the Member States. At the same time, the big business in Europe, however, is controlled by a small group of major multinational banks, which are active in several Member States. Consequence: the supervision of these institutions should also be cross-border organised - hence at European level. However it is not to an adequate extent.
So far the national supervisory authorities have exchanged information in an informal round of Colleges. A dispute between the authorities was not on the agenda; neither was a mechanism for resolving disputes. The financial crisis has shown how dangerous this situation is. If the public purse has to come to the rescue of a cross-border financial institution, the question quickly arises which Member State will have to pay and who lays down the rules. A starting position, which for example massively aggravated the crisis of the Belgian Fortis Bank, due to the fact that at the height of the crisis the various national supervisory authorities were not able to work out solutions together.
Subsequently to the recommendations of the Larosière Report, the Commission has this year presented a package for restructuring the European financial supervision, which intends among others to eliminate these weak points by revaluating the currently existing Colleges for European agencies and by mechanisms of dispute resolution. One did not have to wait long for the outcry of some Member States, in particular of Great Britain. Too much Europe and a loss of competence for the national supervisory authorities. Consequently, there are already coalitions being forged in the Council to further water down the in any way not very far reaching proposal of the Commission – a tactic, which is also vehemently pursued by London & Co with regard to all other recommendations on regulating the financial markets.
In this situation, where some Member States once again work at full speed to limit Europe’s options for action to a minimum, the eyes are turning to the European Parliament, which in this matter has to co-decide as equal partner. The economic committee in charge has appointed the parliamentary rapporteurs for the individual parts of the financial supervision package and the parliamentary rapporteurs will this week jointly present and discuss a first working document in Strasbourg.
A realisation from this first debate: the parliamentarians will probably take their decisions less along party political lines but more based on national interests. And the pressure exerted by the Member States on the Parliament is great. The discussions in the Council are already well advanced and the Council tries to press the Parliament for a quick decision. Some MEPs, such as the German Social Democrat Udo Bullmann, the Austrian EPP MEP Othmar Karas or the British Liberal Committee Chair Sharon Bowles, however, nevertheless supported a strong and active independent role of the Parliament. It remains to be seen which part the European Parliament will play in the overall debate on regulating the financial markets: one of a vicarious agent of the governments in the capitals or one of a confident and strong advocate of the citizens in Europe, which are right in demanding from the EU to do everything in its power to avoid a new crisis at the expense of the workforce.
Further information:
Legislative proposal of the European Commission on European Financial Supervision
Working Paper of the Committee on Economic and Monetary Affairs of the European Parliament on European Financial Supervision
For years, renowned experts had warned that the existing supervisory structure for financial institutions in Europe does no longer do justice to the real situation. The supervision of banks, insurance companies and securities trading is still mainly located in the Member States. At the same time, the big business in Europe, however, is controlled by a small group of major multinational banks, which are active in several Member States. Consequence: the supervision of these institutions should also be cross-border organised - hence at European level. However it is not to an adequate extent.
So far the national supervisory authorities have exchanged information in an informal round of Colleges. A dispute between the authorities was not on the agenda; neither was a mechanism for resolving disputes. The financial crisis has shown how dangerous this situation is. If the public purse has to come to the rescue of a cross-border financial institution, the question quickly arises which Member State will have to pay and who lays down the rules. A starting position, which for example massively aggravated the crisis of the Belgian Fortis Bank, due to the fact that at the height of the crisis the various national supervisory authorities were not able to work out solutions together.
Subsequently to the recommendations of the Larosière Report, the Commission has this year presented a package for restructuring the European financial supervision, which intends among others to eliminate these weak points by revaluating the currently existing Colleges for European agencies and by mechanisms of dispute resolution. One did not have to wait long for the outcry of some Member States, in particular of Great Britain. Too much Europe and a loss of competence for the national supervisory authorities. Consequently, there are already coalitions being forged in the Council to further water down the in any way not very far reaching proposal of the Commission – a tactic, which is also vehemently pursued by London & Co with regard to all other recommendations on regulating the financial markets.
In this situation, where some Member States once again work at full speed to limit Europe’s options for action to a minimum, the eyes are turning to the European Parliament, which in this matter has to co-decide as equal partner. The economic committee in charge has appointed the parliamentary rapporteurs for the individual parts of the financial supervision package and the parliamentary rapporteurs will this week jointly present and discuss a first working document in Strasbourg.
A realisation from this first debate: the parliamentarians will probably take their decisions less along party political lines but more based on national interests. And the pressure exerted by the Member States on the Parliament is great. The discussions in the Council are already well advanced and the Council tries to press the Parliament for a quick decision. Some MEPs, such as the German Social Democrat Udo Bullmann, the Austrian EPP MEP Othmar Karas or the British Liberal Committee Chair Sharon Bowles, however, nevertheless supported a strong and active independent role of the Parliament. It remains to be seen which part the European Parliament will play in the overall debate on regulating the financial markets: one of a vicarious agent of the governments in the capitals or one of a confident and strong advocate of the citizens in Europe, which are right in demanding from the EU to do everything in its power to avoid a new crisis at the expense of the workforce.
Further information:
Legislative proposal of the European Commission on European Financial Supervision
Working Paper of the Committee on Economic and Monetary Affairs of the European Parliament on European Financial Supervision