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June 8, 2009updated 13 Apr 2017 8:56am

EU reform focuses on cross-border supervision

Three new regulatory bodies are set to make their appearance in the European Union (EU) in 2010 following the European Commissions (EC) acceptance of proposals put forward by a study group chaired by Jacques de Larosiere, a former governor of Frances central bank and former chief executive director of the International Monetary Fund. Charged by EC president Jos Manuel Barroso in 2008 to make recommendations aimed at improving supervision of cross-border financial markets, the de Larosire Group as it is known proposed establishment of three new EU supervisory authorities: the European Insurance and Occupational Pensions Authority (EIOPA), the European Banking Authority (EBA) and the European Securities Authority (ESA).

By LII editorial

Three new regulatory bodies are set to make their appearance in the European Union (EU) in 2010 following the European Commission’s (EC) acceptance of proposals put forward by a study group chaired by Jacques de Larosiere, a former governor of France’s central bank and former chief executive director of the International Monetary Fund.

Charged by EC president José Manuel Barroso in 2008 to make recommendations aimed at improving supervision of cross-border financial markets, the de Larosière Group – as it is known – proposed establishment of three new EU supervisory authorities: the European Insurance and Occupational Pensions Authority (EIOPA), the European Banking Authority (EBA) and the European Securities Authority (ESA).

EIOPA, EBA and ESA would, respectively, replace the existing Committee of European Insurance and Occupational Pensions Committee, Committee of European Banking Supervisors and Committee of European Securities Regulators.

These three new authorities would work in a “network with national supervisors,” Charlie McCreevy, the EU commissioner for internal markets and services, told journalists attending a press conference in Brussels.

Central to the network would be the proposed European System of Financial Supervisors (ESFS) aimed at facilitating working relationships between the three new supervisory authorities and national regulators.

“This network would develop common supervisory approaches to the supervision of all financial firms, to protect consumers of financial services and to contribute to the development of a single set of harmonised rules,” explained McCreevy.

The three new supervisory authorities would also be charged with drawing up technical standards to help ensure the consistent application of EU law and resolve disputes between supervisors, McCreevy added.

Significantly, the authorities would have full supervisory powers for some specific entities such as credit rating agencies.

Proposed regulatory reform, which Barroso conceded was ambitious, does not end at the three new supervisory bodies. Also proposed is the establishment of the European Systemic Risk Council (ESRC).

The ESRC, which would be chaired by the president of the European Central Bank and include all central bank governors of the 27 EU member states as members, would be tasked with monitoring and assessing risks to the stability of the financial system as a whole.

“The new body [ESRC] would, for the first time, equip the EU with a pan-European macro-prudential supervision system,” the EU’s monetary affairs commissioner, Joaquín Almunia, told press conference attendees.

Proposed regulatory changes have been generally well received by insurance industry bodies including the European federation of insurers and reinsurers, the Comité Européen des Assurances (CEA).

“The European insurance industry very much welcomes the EC proposals for an improved EU system of financial supervision,” said the CEA’s director general, Michaela Koller in a statement.

“The insurance industry is convinced that supervisory co-operation and convergence is an appropriate answer to the current crisis.”

The Association of British Insurers (ABI) added its stamp of approval.

“It looks like the ‘supervisor of supervisors’ that we have argued for will become a reality,” said the ABI’s director of financial regulation and taxation, Peter Vipond.

“It will provide consistency across Europe, something desperately needed by companies which operate across national boundaries, he stressed.

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