Yesterday, Lorenzo Bini Smaghi, a member of the Executive Board of the European Central Bank (ECB), delivered a speech on potential “enhancements to the European regulatory and supervisory architecture which need to be implemented in order to restore confidence.” He listed three recommendations to improve “European supervisory shortcomings:”

  • No discretionary interpretation of EU directives in order to secure advantages for domestic institutions and markets
  • Macro and micro-prudential supervision have to be brought closer together, which could be achieved within a single institution
  • National and European authorities have to work in a more integrated way, both in respect of crisis prevention and resolution

Mr. Bini Smaghi concluded his recommendations by suggesting the ECB could be the central supervisory authority for European financial institutions and that “the ECB is ready to assume responsibility for the tasks that Europe’s political authorities may assign to it.”

Mr. Bini Smaghi’s view is in contrast to the model set forth by the U.K.’s Financial Services Authority, which suggested greater host-country control over financial institutions.