The European Commission has published a speech by Charlie McCreevy (European Commissioner for Internal Market and Services) at the EP Committee on Economic and Monetary Affairs.
At the beginning of his speech Commissioner McCreevy briefly discusses the economic slowdown, stating that for the first time, there is almost a symmetric slowdown across all major economies. This therefore makes predicting the speed of economic recovery difficult.
Commissioner McCreevy then looks at some of the proposals that the Commission has brought forward to restore confidence. This includes proposals relating to capital requirements, credit rating agencies and Solvency II.
On capital requirements Commissioner McCreevy states that he has taken alot of flak on the securitisation rules and on liquidity and prudential regulation but has no regrets. He then makes the following two points:
- The proposed carve-out of all short term inter-bank exposures from any prudential rules will jeopardise the stability of the European financial system. Member States don't want this and supervisors have warned against it.
- He welcomes the suggestions from some members of the European Parliament regarding increasing the securitisation retention requirement to 10% or 20%. But any attempt to exclude vaguely described types of securitisation from the requirements will result in huge arbitrage opportunities and gut the proposal.
In the second half of his speech Commissioner McCreevy discusses the further work that is needed for a comprehensive reform of the financial system.
He starts by stating that everyone agrees on the need for reform. However, the question is not whether more regulation is needed, but what kind of regulation. Therefore the complex issues that have arisen from the credit crunch need to be understood. To this end:
- The Commission has launched an open consultation on hedge funds, and a review of national regulatory/industry codes for private equity. The Commission is also holding an open hearing on 26th and 27th February 2009.
- The Commission is also examining executive pay and remuneration structure problems in financial services.
- The Commission is also working on a White Paper on crisis management which will set out the draft policy needed to implement a framework for more effective crisis intervention. The White Paper is expected to be published this summer.
- The Commission has also set up De Larosière Group which is looking at the gap between the supervisory structure in the EU and market developments. This group is expected to publish its proposals by the end of this month.
View Address by Commissioner McCreevy at the EP Committee on Economic and Monetary Affairs, 3 February 2009