New financial supervisory framework for Europe

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07 Sep, 2010

On Thursday 2 September the European Parliament, the Council and the European Commission reached a political consensus on the creation of new financial supervisory framework for Europe.

Currently, the financial services sector in Europe is overseen at EU level by three "coordinating committees" that only have advisory powers:
  • the Committee of European Banking Supervisors (CEBS)
  • the Committee of European Insurance and Occupational Pensions Committee (CEIOPS)
  • the Committee of European Securities Regulators (CESR)

These will now be replaced by the following regulatory authorities offering direct EU supervision of systemically important financial institutions:

  • European Banking Authority (EBA)
  • European Insurance and Occupational Pensions Authority (EIOPA)
  • European Securities and Markets Authority (ESMA)

The EBA, EIOPA and ESMA will be empowered to draft regulatory financial standards, which will be made legally binding by the Commission (and then legislated into effect in the member states). The agencies would be able to over-ride national decisions that do not conform to EU regulations.

In addition, a European Systemic Risk Board (ESRB) will be established which will monitor and assess potential threats to financial stability that arise from macro-economic developments and from developments within the financial system as a whole.

The legislation is expected to be passed by the plenary assembly of the European Parliament on 21 September 2010. The new regulatory authorities could start working as early as 1. January 2011. More information about the new authorities can be found here (link to the European Commission page).

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