Despite the ongoing financial crisis, the European Commission seems to be delaying addressing current shortcomings in banking supervision, considered a key factor in the onset of the crisis. Instead, it has appointed a team of experts to present suggestions on the issue by next spring, sparking criticism and raising concern regarding some of the members chosen for the new panel.
The new high level group was presented yesterday (22 October) by Commission President José Manuel Barroso, who is under pressure from the European Parliament and public opinion to take action to address the turmoil.
Nominated as the group's chairman, former Managing Director of the International Monetary Fund (IMF) Jacques de Larosiere will work towards "permanent European coordination of financial issues to face and prevent new crises," said Barroso in the press conference. To do this, "supervision is key", the Commission president underlined.
The aim of the panel is to suggest ways "to articulate supervision in a way which is adequate for the common European market," said Barroso, "but also bearing in mind the global context," added de Larosiere.
The idea is to follow possible developments at international level, where a global system of supervision is under consideration in the context of a 'new Bretton Woods' (EurActiv 15/10/08). However, whether such major reform will actually take place is still difficult to predict, with critics accusing the Commission of shifting the focus away from Europe, where they say changes are needed most as supervision currently takes place exclusively at national level.
A single European supervisor?
De Larosiere has pledged to present initial conclusions of his team's work by the European Council scheduled for mid-March, during the Czech EU Presidency. But despite strong pressure from socialists and liberals in the European Parliament, the group seems little interested in pursuing the introduction of a single European supervisor to overcome the inevitably cumbersome procedures for group or college supervision of cross-border banking institutions. "It is an issue we might take into consideration, but I cannot anticipate the results of our work."
Socialists have pushed for a unique supervisor on various occasions, most recently via a resolution written by their president Poul Nyrup Rasmussen on stricter regulation of the financial system, particularly of hedge funds and private equity. The draft text was eventually modified so it could be voted upon by the assembly. Liberal leader Graham Watson also called for better supervision this week during French President and current EU presidency holder Nicolas Sarkozy's hearing in Parliament's plenary session (EurActiv 22/09/08).
Even President Barroso has urged EU leaders to approve "an integrated EU supervisor" (EurActiv 15/10/08). But the Commission's hands are tied due to strong opposition from many member states. The European Council last week failed to achieve any concrete deal on supervision. In their conclusions, leaders stressed the "need to strengthen the supervision of the European financial sector" but did not endorse specific measures except for monthly meetings of national supervisors, who actually already meet regularly (EurActiv 17/10/08).
Concerns over members of the group
The EU executive is also being attacked for its choice of members in the high level group. In particular, the appointment of two personalities clearly linked to the current financial crisis raised many eyebrows. Rainer Masera was managing director of US investment bank Lehman Brothers, which collapsed last month due to over-exposure to risky financial products, triggering a series of other bank failures. Callum McCarthy was chairman of the British Financial Services Authority (FSA), the body that was supposed to oversee Europe's most affected financial market.