The Association of British Insurers (ABI) has backed the proposed creation of a European body to act as "supervisor of supervisors" across the EU as part of regulatory reform, and put forward five key principles in order to help ensure that reforms bring benefits for consumers.

In its discussion paper, Regulation and Markets for the 21st Century, the ABI said the five principles were:

  • a safe and secure financial services system;
  • prudentially sound firms;
  • competition and innovation;
  • regulation that works across border; and
  • capital markets that are connected to consumer needs.

It said the European body would "not undertake supervision itself, but have oversight of the supervision conducted by national supervisors, with group supervision arrangements being a particular concern." It added that the body should ensure consistent supervision standards across Europe and be given binding mediation powers accordingly. The ABI suggested that the body could be developed by building on three existing committees: the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS), the Committee of European Securities Regulators (CESR) and the Committee of European Banking Supervisors (CEBS).

The ABI also recommended that the current system in the UK be broadly maintained, with the Bank of England, the Financial Services Authority (FSA) and the Treasury having individual roles to play, albeit enhanced roles in the future. One alternative, separating prudential and conduct regulation, would be likely to create new problems of institutional cooperation, increase costs and make it less easy to represent UK views internationally.

The ABI acknowledged that any major restructuring of the regulatory system would take several years to implement. The paper comes in advance of FSA Chairman Lord Turner's review into regulation and next month's G20 London Summit.