EU Reaction to the Financial Market Turmoil

Context of task force Institutional issues which have hampered adequate functioning of European supervision Make recommendations to policy makers with a group reflecting a diversity of interests

Problems with Lamfalussy Level 3 purely advisory Are asked to do more without resources and powers Continuing problem with exchange of information No framework for delegation of supervision

October Ecofin Council common principles for cross-border financial crisis management  Ministers state that they will “carefully cooperate” in the case of a cross-border crisis and react “based on common terminology and on a common analytical framework” a roadmap to practically enhance supervisory cooperation  Member states are ‘encouraged’ to sign ‘voluntary cooperation arrangements’ as soon as possible  Commission to clarify the scope of the EU’s deposit guarantee directive

T Padoa-Schioppa letter Need for formal agency role for Level 3 Committees  Take binding decisions  Set standards Need for a single rulebook Integrated supervision of European-wide banks Need for wise-men’s comittee

December Ecofin Council role of the regulatory and supervisory Committees  Commission asked to consider various options to strengthen the Level 3 Committees “without unbalancing the current institutional structure”, and  Level 3 Committees were requested to strengthen the national application of their guidelines “without changing their legally non- binding nature”  Committees to analyse the options of “voluntary delegation of supervisory competences”  Committees were requested to appky qualified majority voting where necessary financial support under the EU budget for the Level 3 Committee

G-4 Summit London (Jan 30) EU: common ‘things’ but no framework (see October Ecofin) regular reporting from the Level 3 Comm strengthen and clarify the IMF's responsibility to oversee macro financial stability

Broader issues What is transparency? Lack of European-wide oversight, many spokes, no hub Accountability and independence of supervisors National mandate of supervisors, differences in powers Harmonisation of objectives of supervision