June 19 European Union leaders will on Friday
back a reform of financial supervision involving the creation
during 2010 of pan-European standard-setting and risk-monitoring
bodies, according to a final summit draft.
Here are some of the details of the draft conclusions, which
could be amended before the summit ends. The leaders agreed:
* The financial crisis has "clearly demonstrated the need to
improve the regulation and supervision of financial
institutions, both in Europe and globally".
* Further progress must be made in the regulation of
financial markets, notably on the regulation of alternative
investment funds, the role and responsibilities of depositaries
and on transparency and stability of derivatives markets.
* Member states should take action rapidly on executives'
pay and on remunerations in the financial sector.
* A European Systemic Risk Board should be created to
monitor and assess potential threats to financial stability and,
where necessary, issue risk warnings and recommendations for
action and monitor their implementation.
* The members of the General Council of the ECB will elect
the chair of the European Systemic Risk Board.
* A European System of Financial Supervisors, comprising
three new European Supervisory Authorities (ESA), should be
established aimed at upgrading the quality and consistency of
national supervision, strengthening oversight of cross border
groups through the setting up of supervisory colleges and
establishing a European single rule book applicable to all
financial institutions in the Single Market.
* Decisions taken by the European Supervisory Authorities
should not impinge in any way on the fiscal responsibilities of
* The European System of Financial Supervisors should have
binding and proportionate decision-making powers in respect of
whether supervisors are meeting their requirements under a
single rule book and relevant Community law and in the case of
disagreement between the home and host state supervisors.
* ESAs should also have supervisory powers for credit rating
agencies. The European Council further emphasises the importance
of ensuring that the new framework supports sound and
competitive EU financial markets.
* The legislative proposals to put in place the new
framework for EU supervision should be brought forward to the
autumn of this year and these proposals need to be adopted
swiftly in order for the new framework to be fully in place in
the course of 2010.
* EU leaders will take stock of progress at its meeting in
October 2009 and will if necessary provide further direction.
* The European Commission should make concrete proposals for
how the European System of Financial Supervisors could play a
strong coordinating role among supervisors in crisis situations,
while fully respecting the responsibilities of national
authorities in preserving financial stability and in crisis
management in relation to potential fiscal consequences and
fully respecting central banks' responsibilities, in particular
with regard to the provision of emergency liquidity assistance.