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Euro body could set standards but no regulation role

The FSA supports the creation of a European regulatory coordinator to set standards of best practice but stops short of championing a pan-European regulator.

The Turner review calls for an institution that is independent from the European Commission, to replace the existing level three banking, securities and insurance committees.

The body would encompass both prudential and conduct of business regulation, although it would have no powers over national supervisors to change individual regulatory decisions nor to prescribe supervisory practice.

Its roles and responsibilities would include the drafting of detailed technical rules, giving advice to the commission on drafting framework directive texts and issuance of non-binding guidance to member states on best practice.

The review says: “The current arrangements, combining branch passporting rights, home-country supervision and purely national deposit insurance, are not a sound basis for the future regulation and supervision of European cross-border retail banks. This body would be an independent authority with regulatory powers, a standard-setter and overseer in the area of supervision and would be involved alongside central banks in macro-prudential analysis while leaving primary responsibility for supervision at member state level.”

Beachcroft Regulatory Consulting managing director Richard Hobbs says that the FSA’s proposals go no further than plans set out by former French minister Jacques de Larosière who recently published a report on European regulation which also stopped short of recommending a powerful EU regulator.

He says: “The problems we have got in the global financial system existed largely in London and the US so how does an EU regulator deal with that? Greater EU focus and coordination is good but a formal EU regulator would be preposterous.”

The Association of British Insurers says: “We believe the FSA should go further and support a body with powers to settle disputes between regulators over cross-border companies.”

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