European Union (EU) heads of government have agreed to establish a new
Europe-wide system of financial supervision, imposing arbitration on national
regulators disagreeing over controls of cross-border banks and other financial
The decision follows tough bargaining at Friday’s EU summit in Brussels
between Britain – which wanted to minimise EU controls over its financial sector
– and France and Germany, which favoured a strong European financial watchdog.
The compromise will see the European Commission bring forward legislative
proposals to create three new ‘European Supervisory Authorities’.
Charged with upgrading national financial supervision within the EU the
authorities would act through the creation of supervisory ‘colleges’ for large
private institutions (as suggested at the recent G20 meeting in London) and
establishing a ‘European single rule book applicable to all financial
institutions’, said the summit communiqué.
These authorities would have ‘binding and proportionate decision-making
powers’ to force national regulators to comply with these EU rules. They would
also have power to adjudicate ‘in the case of disagreement between the home and
host state supervisors’ of a cross-border financial institution, and also
‘supervisory powers for credit rating agencies’.
The summit also backed creating a European Systemic Risk Board monitoring and
assessing threats to EU financial stability, issuing risk warnings and
recommendations for action.
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