On the 27th May, the European Commission adopted a communication on strengthening the European Financial Supervision. It sets out proposals for a new European financial supervisory framework. This is based on the recommendations of de Larosiere Report. It says that the framework will consist of two pillars:
- A European Systemic Risk Council (ESRC). This is designed to provide a macro prudential supervision at EU level by monitoring and assessing the risks to the stability of the financial system as a whole. In addition to giving early warning of systemic risks it will make recommendations for dealing with them and will also liaise with global and third country counterparts.
- A European System of Financial Supervisors (ESFS). This will consist of the national supervisors working with the new European supervisory authorities. These will replace, and have additional responsibilities, powers and authority to, the existing committees of European supervisors that is CEBS, CEIOPS, and CESR. It is envisaged that the ESRC and the ESFS will cooperate and exchange information and to micro prudential information will be passed to the European Supervisory Authorities by national supervisors. The Commission has invited the Council to endorse the framework and it is envisaged that the legislative proposals to give effect to this will follow in Autumn and the structure should be in place in 2010. Feedback is invited on the communication by 15 July 2009. The Commission has also published impact assessments and frequently asks questions in relation to the proposal.