EU passes 'historic' agreement on bank supervision

"The banking crisis exposed the gaps in financial services supervision in Europe. Our market was interdependent but oversight was purely national. In response I asked Jaques De Larosière to come with a vision which the Commission then turned into concrete proposals with an ambitious timetable," said European Commission Presisdent José Manuel Barroso, welcoming the Parliament's backing.

"With this reform Europe is the first region in the world to put in place top-notch supervision that is up to the challenges of the future," Barroso added.

"We have worked so that Europe learns the first important lesson of the crisis, that of the failure of appropriate supervision. Today's supervision is a fundamental moment for the evolution of financial regulation in Europe. It is the foundation which gives credibility to the sectoral initiatives we are taking. These initiatives should allow us to avoid severe crises recurring, to protect citizens who are also taxpayers, and to contribute to fair and sustainable growth," EU Internal Market Commissioner Michel Barnier said in a statement.

Economic and Monetary Affairs Commissioner Olli Rehn added: "Macro-prudential supervision was clearly the weakest link of the pre-crisis framework. The creation of the ESRB is a decisive and innovative step towards a stronger and more stable financial system."

Spanish MEP José Manuel Garcia-Margallo (European People's Party), vice-chairman of the European Parliament's economic and monetary affairs committee, welcomed the adoption of the legislative package, which he said would ensure that "the 'main street' no longer pays for the 'irrational exuberance' of financial entities".

"We need to learn from what has happened so that […] we do not find ourselves as vulnerable as now," García-Margallo said.

German Socialist MEP Udo Bullmann, economic affairs spokesman for the S&D group, described the new measures as "the first step towards even stricter rules".

"The S&D group will work with the Council to plug gaps in regulation, particularly as far as hedge funds and private equity, derivatives and short selling are concerned," he pledged.

Green MEP Sven Giegold welcomed the establishment of the new authorities, saying that "Europe-wide regulation is the only viable response to the financial challenges we face and for preventing a return to financial chaos".

Despite opposition from some member states that "refused to acknowledge lessons from the financial crisis," according to Giegold, "the supervisory authorities will be more important than originally foreseen and have real teeth due to the insistence of the EU Parliament".

The Green MEP pledged that the Parliament would continue to fight to ensure that meaningful supervision is provided.

"This deal ensures that cross-border markets can be supervised by cross-border institutions who coordinate the work of national regulators. It provides the markets with a common rule book and greater certainty over the key questions of who will regulate what and where," British Conservative MEP Kay Swinburne said.

"Instead of handing over the keys to the City of London, this deal places it in a kind of European Neighbourhood Watch programme. Peer oversight will provide us all with loudhailer warnings when there are macro systemic or particular risks," Swinburne added.

"The British conservatives have given away the keys to the City of London," said British MEP Godfrey Bloom, a member of the UK Independence Party (UKIP).

In response to more sceptical remarks from British MEPs, Peter Skinner, a British Labour MEP, said: "If you think you can just sit on your island, then you are wrong."

MEP Alyn Smith (Scottish National Party) hailed the approval by MEPs of the financial supervision package: "The Single European Market is the EU's biggest achievement. It has created much prosperity across our 27 states and it is imperative that we regulate that market properly. We needed to update the supervisory architecture and this package takes us a good few steps forward."

The European Fund and Asset Management Association (EFAMA) described the vote as "a major step towards  a more effective single market for financial services in the European Union and also provides adequate tools to better protect investors and financial market participants against systemic risks". 

EFAMA fully embraced the creation of three strong European Supervisory Authorities with increased competences and welcomed the power given to those authorities to elaborate binding technical standards and to develop a single EU rule book.

"This will help to prevent gold-plating and regulatory arbitrage, and thus reduce legal uncertainties and decrease significantly the huge compliance costs that our members are currently facing when they operate on the securities markets of all 27 EU member states," read an EFAMA statement.

"As managers of UCITS, probably the best example to date of a truly pan-European retail financial product, our members have a very strong interest in an harmonised European supervisory framework with powerful authorities liaising closely with national authorities," said EFAMA Director-General Peter de Proft. 

"We therefore strongly welcome the reform of the European Supervisory Architecture, which represents a major step towards an effective single market," de Proft said. 

"We look forward to establishing as constructive a relationship with ESMA as we have established with the Committee of European Securities Regulators (CESR). We encourage ESMA to build onthe CESR's good practices of open and transparent consultation of stakeholders and would welcome the creation of a consultative panel specifically dedicated to asset management-related matters," he added.