Est. 3min 02-10-2008 (updated: 28-05-2012 ) barroso_hands.jpg Euractiv is part of the Trust Project >>> Languages: Français | DeutschPrint Email Facebook X LinkedIn WhatsApp Telegram The European Commission yesterday (1 October) again called for a “structured European response” to the current financial crisis but showed a cautious approach in the long-awaited proposals it put forward to revise banks’ capital requirements. Under the proposed rules, banking institutions will have to hold a higher amount of capital to protect themselves against the risk of failure. In the case of multinational companies, their supervision will be carried out not only at national level, but also with a higher, although cumbersome, cross-border cooperation. Moreover, the Commission hinted a possible increase on the level of coverage that European banks have to guarantee for saving deposits. Commission President José Manuel Barroso openly called for “a structured, truly European response”. “This is the only way to make sure that stability and confidence will return”, he said yesterday during a press conference in Brussels. However, the announced steps forward are only a partial response to the needs and the requests, which have been raised in the past months and made more urgent by the current crisis. In particular, the Commission decided to propose only a limited guarantee for financial institutions which issue securitised products, considered at the origin of the current global turmoil. In other words, a financial institution that repackages loans in tradable securities will be forced to keep a 5% of the exposures, rather than the original 15% foreseen. The EU executive modified the figure after strong pressure from the banking industry, with Internal Market Commissioner Charlie McCreevy yesterday restating his conviction that the origins of the crisis were in the “regulated” banking sector. But critics said he omitted to mention that the sub-prime market, where the chain effect started, has been highly unregulated. McCreevy however rejected any idea of a unique European supervisor to protect Europe from potential future crises, an idea which is supported by the two main political parties in the European Parliament. He pushed forward the plan for collegial supervision, labeling it “a pragmatic step”. According to the proposal, any multinational group will have an ad hoc college of supervisors, made up by the authorities of the states where the company operates (EURACTIV 12/09/08), but with an unclear power sharing. The boldest proposals include the obligation for banks to hold at least 25% of their own funds to guarantee their lending operations to other banks. In addition, the Commission “is planning further improvements, especially with regard to the speed of payouts and levels of coverage” for deposit guarantee schemes. At the moment the EU rules foresee that all deposits in EU banks are covered for only €20,000. In the United States the figure will be raised to $250,000 if the bail-out bill will be passed. Read more with Euractiv France and Germany clash over bank rescue plansThe two countries often referred to as "the engine of the European Union" clashed yesterday (1 October) over whether the EU should create a fund to rescue banks hit by the global financial crisis. Subscribe now to our newsletter EU Elections Decoded Email Address * Politics Newsletters Positions Commission President José Manuel Barroso told a Brussels press conference: "We are ready to put forward a European response to this financial crisis. We need a further strengthening of supervision structures at the European level. We need to improve the consistency of deposit guarantee schemes." Competition Commissioner Neelie Kroes echoed this view in a separate press briefing, repeating her plea to member states "not to act unilaterally" to the crisis and instead "continue to refer to the European Commission" in case of severe problems in their banking sectors, as shown by the latest rushed rescue plans for Fortis and Dexia. Internal Market Commissioner Charlie McCreevy defended his prudent line on introducing new requirements for banks. Regarding supervision, he said: "The college of supervisors is a pragmatic step. The idea of unique supervisor had no backing in the Council. It is a sector where progresses are very gradual." "It is clear that supervision of the financial markets is not working," declared Joseph Daul, chairman of the EPP-ED Group in the European Parliament. "It is clear that there is no European agency with adequate authority to properly supervise the financial markets. The European Central Bank has some powers and is managing the crisis very well, but clearly it does not have adequate authority to properly supervise a market that has become European and global," he added. French Socialist MEP Pervenche Beres, who chairs the European Parliament's committee on economic and monetary affairs, stressed the need for Europe "to set up a policing mechanism to control our financial markets," pointing to the ECB. "The supervisory role of the European Central Bank needs to be beefed up. You can't ask the ECB to be the lender of last resort and to refuse to let it have an overall view of the accounts of the banks." Graham Watson, leader of the Liberals and Democrats (ALDE Group) in the European Parliament, welcomed the EU executive's proposals: "The Commission is right to propose Europe-wide measures to address the genuine concerns of Europe's citizens with respect to their savings and mortgages. As the credit crunch sweeps across the globe, we need to demonstrate the benefits of EU solidarity and a sense of proportion in designing a legislative response that addresses the problem without strangling the market itself. We do not wish to throw the baby out with the bathwater." UNI-Europa, the European trade union organisation for services, sent a letter in September to French Finance minister Christine Lagarde, who holds the rotating presidency of the EU. The letter states: "Current circumstances prove that regulation and international supervision standards, including EU standards, must be tightened and regularly updated to keep up with new requirements and with the innovativeness of the industry. Self-regulation and the industry’s self-imposed moral obligations are not sufficient. This crucial sector of the economy must be regulated to regain the confidence of all actors". BackgroundFinancial markets across the globe went into a tailspin following the US sub-prime mortgage crisis in early August 2007, forcing central banks to make massive cash injections to keep the system rolling and fend off a possible liquidity crisis. While Europe already had a taste of the crisis imported from the US last year with the rescue of the British mortgage lender Northern Rock (EURACTIV 10/10/07), until recently the turmoil had largely remained contained to the UK, with no large continental groups affected until recently. But the crisis stormed into mainland Europe this week, forcing governments to rush to salvage Belgo-Dutch bank and insurer Fortis (EURACTIV 29/09/08), German lender Hypo, British lender Bradford & Bingley (B&B), Franco-Belgian bank Dexia and some of the main Irish banks (EURACTIV 30/09/08). Further ReadingEuropean Union EUR-LEX:Capital Requirements Directive(14 June 2006) European Commission:Proposal to review the Capital Requirements Directive(1 October 2008) European Commission:Memo on review of the Capital Requirements Directive(1 October 2008) European Commission:Barroso's speech(1 October 2008) European CommissionMcCreevy's speech(1 October 2008) European Parliament:Comment on Commission's proposals(1 October 2008) European Commission:Press release on review of the Capital Requirements Directive(1 October 2008) [FR] [FR] [DE]
