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

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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

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

“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.