EU Parliament agrees to new financial supervisory authority at European level. In future, it will control banks, financial markets and the insurance industry.

On Wednesday, the European Parliament (EP) voted by an overwhelming majority for the overhaul of the European financial supervisory authority, which will serve as an effective instrument for the early identification of future risks and for a common approach to  crisis prevention. This means a strengthening of "Europe" based on a significant increase in competence in respect of regulating the financial markets.

However, some hurdles had to be overcome on the final straight:

At the centre of the debate was the question as to what extent the EU will be strengthened towards nation states and how far the power to overrule will infiltrate them. This was accompanied by the fear of some nation states with strong financial markets, such as Germany or Great Britain, to lose their importance.

The position of the Austrian government, the Austrian Financial Market Authority, but also of the AK was to create a central European authority with very strong powers to overrule.

A controversial issue was the question where the new authority should be based. Due to cost considerations, but also for reasons of better coordination and cooperation, the EP was in favour of the authorities having their central headquarters in Frankfurt. The EU Council (the "representation of the nation states") and here in particular the proposal of the states with strong financial markets prevailed to decentralise the authorities: the European supervisory authority for banks in London, for the insurance industry in Frankfurt, for securities in Paris and the risk council also in Frankfurt.

The second hurdle was the power of these new authorities to overrule and which part the national and newly created European authorities will play in future. The EP gravitated more to a powerful European institution with strong powers to overrule whilst the Council tried to keep competences more at a national level. The compromise now provides for the option that European authorities can exercise their powers in a "state of emergency" also at national level. It is, however, the Council that decides when a "state of emergency" exits.

Finally Great Britain got its way concerning the fact that the EU authorities cannot as planned order nation states to financially support banks that are in trouble.

All in all, these authorities are an acceptable compromise between a central strengthening of Europe and the competences of the nation states. The agreement between Member States and the European Parliament is an important step in the direction of European Financial Market Regulation and a good foundation to be able to manage crises better in future. The overall package was accepted by the EP with 587 votes in favour, 35 against and 40 abstentions.