We reported last week on the publication of the de Larosière Report on financial supervision in the EU (you can see that post by clicking here). The European Commission has now published its own proposals for radical reform of the regulatory and supervisory regime in Europe. The Commission's communication is titled "Driving a European Recovery" and addresses financial services reform, support for the 'real economy' and support for people through the crisis.
So far as regulatory and supervisory reform is concerned, the communication welcomes the 31 recommendations of the de Larosière report. The communication considers in more detail two proposals for the establishment of new European bodies discussed in the de Larosière report.
The first is the proposal for a "macro-prudential" body, under the auspices of the European Central Bank (ECB), which would gather and assess information on all risks across all sectors of finance in Europe. The de Larosière report had proposed that the body would bear the title "European Systemic Risk Council" (ESRC) and would be composed of representatives of the ECB and the Governors of the central banks of each European State, plus the chairpersons of the sector-specific "level three committees" (of which, more below). Although the de Larosière report acknowledges the possibility that the heads of each Member State's financial services supervisor could take the place of the relevant central bank Governor on the ESRC when the situation calls for it, it seems likely that there will be calls for direct representation of the financial services supervisors (where that is not the State's central bank) on the ESRC.
The second (a "micro-prudential" system) is the recommended strengthening of three existing "level three committees": the Committee of European Banking Supervisors, the Committee of European Securities Regulators and the Committee of European Insurance and Occupational Pensions Supervisors. Where the de Larosière report called for the strengthening of the committees as a first stage and then their promotion to the status of "European Authorities", the Commission's communication proposes that those two phases are completed simultaneously, followed by an examination into the feasibility of combining one or more of the authorities with a view to ensuring maximum supervisory coherence.