The EC says a European Systemic Risk Council should monitor and assess risks to the stability of the financial system as a whole. The ESRC will provide early warning of systemic risks that may be building up and, where necessary, recommendations for action to deal with these risks.
The EC says the creation of the ESRC would address one of the “fundamental weaknesses highlighted by this crisis, which is the exposure of the financial system to interconnected, complex, sectoral and cross-sectoral systemic risks”.
It is also calling for the creation of a European System of Financial Supervisors for the supervision of individual financial institutions.
This will consisting of a “robust network of national financial supervisors working in tandem with new European Supervisory Authorities”, created by the transformation of existing Committees for the banking securities and insurance and occupational pensions sectors.
The EC says the ESFS is to be built on shared responsibilities, combining nationally-based supervision of firms with specific tasks at the European level.
The Commission says: “It aims to foster harmonised rules and coherent supervisory practice and enforcement. This network should be based on the principles of partnership, flexibility and subsidiarity and should aim to enhance trust between national supervisors by ensuring, inter alia, that host supervisors have an appropriate say in setting financial stability and investor protection policies so that cross-border risks can be addressed more effectively.”
Legislation to embody these proposals will follow in the autumn. The Commission is inviting all interested parties to submit their reactions before July 15.
ABI director of financial regulation and taxation Peter Vipond says: “It looks like the ‘supervisor of supervisors’ that we have argued for will become a reality.
“It will provide consistency across Europe, something desperately needed by companies which operate across national boundaries. The Commission has added substance to the proposals of Jacques de Larosiere, published earlier this year.”