To overhaul financial supervision:

EU summit adopts ambitious plan

BELGIUM: European Union (EU) leaders are set to adopt an ambitious plan to strengthen financial supervision across the 27-nation bloc at a two-day summit starting Thursday.

As a key part of wider efforts to prevent the recurrence of the ongoing financial crisis, the new plan would in essence improve pan-European regulation of cross-border financial markets within the EU.

Currently, financial supervision is virtually in the hands of EU member states, but the nationally-based supervisory model has lagged behind the transnational reality of today’s European financial markets, in which many financial firms operate across borders.

The EU said the financial crisis exposed serious failings in the cooperation, coordination, consistency and trust between supervisors of different member states, making reform necessary.

According to a proposal tabled by the European Commission for the summit, the reform would adopt a two-track approach by strengthening financial supervision at both macro- and micro-level.

On the macro-level, a European Systemic Risk Board (ESRB) comprising central bankers and national regulators would be established to monitor and address risks to the stability of the financial system as a whole.

By providing analysis, issuing early warnings of system-wide risks and recommendations to deal with these risks, the new body would for the first time equip the EU with a prudential pan-European supervision system.

On the micro-level, a European System of Financial Supervisors (ESFS) would be formed to supervise individual financial institutions, which consists of a robust network of national financial supervisors working in tandem with new European Supervisory Authorities.

It is created by transforming existing committees for the banking securities and insurance and occupational pensions sectors. The new system aims to foster harmonized rules and coherent supervisory practice and enforcement across the EU.

Brussels, T

hursday, Xinhua