20 October 2009: FOR IMMEDIATE RELEASE
TREASURY COMMITTEE LAUNCHES INQUIRY INTO PROPOSALS FOR EUROPEAN MACRO AND MICROPRUDENTIAL FINANCIAL REGULATION
The Treasury Committee is launching an inquiry into the European Commission's proposals for financial regulation and supervision and, in particular, the detailed proposals for a European Systemic Risk Board and three European supervisory bodies: a European Banking Authority, a European Insurance and Occupational Pensions Authority and a European Securities and Markets Authority.
The Committee is seeking evidence on the proposals, and in particular, on
The interaction between EU, national and international regulatory and supervisory arrangements;
the composition and internal structures of the supervisory authorities and the ESRB;
whether the powers proposed for these bodies are appropriate;
the proposals' effect on the competitiveness of the European financial industry in general and the City of London in particular;
the timescale for agreeing the legislation.
The inquiry is urgent as the proposals are expected to be considered at the ECOFIN meeting and the European Council on 2 December 2009 and 10-11 December respectively. The Committee would appreciate memoranda as soon as possible, and by Friday 13 November at the latest.
The Chairman of the Committee, Rt Hon John McFall, said:
"The Commission's proposals build on those in the de Larosi¨re report, but it is important to get the structure of financial regulation in Europe right. That means all stakeholders need time to study the detail. We have launched this urgent inquiry to make sure that those with any concerns can raise them with the Committee before the ECOFIN meeting on 2 December. These proposals will set the shape of European regulation and supervision for many years to come: it is regrettable there is so little time to consider them."
Committee Membership is as follows: Rt Hon John McFall (Chairman), Nick Ainger, Mr Graham Brady, Mr Colin Breed, Jim Cousins, Mr Michael Fallon (Sub-Committee Chairman), Ms Sally Keeble, Mr Andrew Love, John Mann, Mr James Plaskitt, John Thurso, Mr Mark Todd, Mr Andrew Tyrie, Sir Peter Viggers.
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In October 2008, the President of the European Commission Jose Manuel Barroso asked Jacques de Larosiere, a former Managing Director of the IMF, to chair a High-Level Group examining the future of European financial regulation and supervision. The Group, which published its findings in February 2009, proposed a new framework for European supervision, including steps to reduce risk and improve risk management, reduce procyclicality and build crisis management procedures.
The Report also advocated upgrading macro-prudential supervision at the EU level, specifically through the establishment of a European Systemic Rick Council (ESRC), chaired by the President of the ECB, with its membership including, amongst others, representatives from the National Central Banks of all 27 Member States. Where necessary, the ESRC would issue risk-warnings and recommendations to policymakers and supervisors and the Report called for mechanisms to be put in place to ensure that identified risks were properly addressed at national level.
The Report also called for a greater role for the EU in micro-prudential supervision, primarily through the establishment of a European System of Financial Supervision (ESFS). This entailed the creation of three new 'authorities': a European Banking Authority, a European Insurance Authority and a European Securities Authority. The 'authorities' would coordinate the application of supervisory standards, ensure strong cooperation between national supervisors and would have binding powers over national supervisors on supervisory standards. Day-to-day supervision would, however, remain the responsibility of national regulators. De Larosiere also called for the establishment of a college of supervisors for the supervision of cross-border banks within the EU.