Prime Minister José Luis Rodríguez Zapatero will seek to push for the implementation of the European Systemic Risk Board (ESRB) for macro-prudential supervision as a matter of priority, according to Spanish newspaper reports.
Yesterday (6 December), the Spanish Presidency told EurActiv that it is satisfied with the current proposal on the ESRB, approved at the last meeting of the 27 finance ministers in December, and that it will try to reach an agreement with the European Parliament on the whole package at first reading.
However, lawmakers in the European Parliament warn that all aspects of the ESRB are still up for discussion and that the Parliament's committees are largely disgruntled with the shape of the current proposal.
In particular, MEPs lament "vague language" explaining how the ESRB will interact with three European Supervisory Authorities (ESAs) for micro-prudential supervision.
Parliamentary reports due out in mid-February will argue for closer ties between the macro and micro-supervisors and question the ESRB's ability to assess systemic risk without the information gathered by the ESAs.
"The vague language in the proposal implies that it will be a weak institution," say sources close to the reports' authors.
ESRB has no binding powers
The controversial ESRB and ESAs have been jointly authored by Commissioners Charlie McCreevy, responsible for the internal market, and Joaquin Almnuia, in charge of economic and monetary affairs.
Since the ESRB's inception, the body has been heavily criticised for aligning itself too closely with the European Central Bank (ECB) and national central banks. Critics also point out that the new body has no binding legal powers.
"It has been conceived as a 'reputational' body with a high-level composition that should influence the actions of policymakers and supervisors by means of its moral authority," reads the Commission proposal.
The board's power over member states is summarised in Brussels circles as "comply or explain" – non-compliant financial institutions which stand accused of causing a systemic risk will either have to correct their practice or explain what they are up to.
Observers say that the board's authority will not depend on the "moral" pressure exerted by the board members but rather on the eminence of the people on the General Board, the ESRB's decision-maker.
The board will be made up of governors from the 27 national central banks, the president and vice-president of the ECB, a member of the European Commission and the chairpersons of the three ESAs.
Many unanswered questions
But it is still largely unknown how exactly the board will detect systemic risk and how early it will be able to intervene in risky trading.
Brussels-based diplomats say member states will have to "wait and see" how and how well the body will work in practice.
In addition, the ESRB will first have to set out what it believes to be systemic risk. This is currently the subject of working papers being written by the ECB. These papers are not currently being released to the press.
MEPs also warn that the board will be hampered by a need to be discrete and it will be difficult to know whether it is fulfilling its function.
That is, the board will not be able to shout from the rooftops if a bank is causing systemic risks as this will likely have a snowball effect on financial markets and sap investor confidence.
