Sunday 18 March 2018

New EU finance watchdogs to bare their teeth in January

Brendan Keenan

IRISH banking regulations will soon have EU oversight after the European Parliament voted in favour of sweeping changes designed to prevent the kind of excesses which have crippled the Irish economy and severely damaged European banking.

Three new EU banking watchdogs will come into force in January and oversee supervision in the banking, insurance and securities markets.

The main one is the European Systemic Risk Board (ESRB) which will include all central bank governors from the 27 EU member states and chaired initially by the European Central Bank president, Jean Claude Trichet.

Although banking supervision will remain with the national regulators, the ESRB will be able to intervene if it thinks banks are becoming too exposed in any EU country.

The new bodies can also mediate in the event of disputes between national regulators, and acquire significantly greater powers if member states decide that an "emergency" situation exists, as well drawing up harmonised technical standards for EU regulators to apply.

The crisis showed that there was no effective system for dealing with the operations of cross-border banks, even though the EU had established a single capital market across the union.

It also exposed technical and political weaknesses in national regulators such as Ireland's.

The new European Supervision Authority for securities markets will also oversee credit rating agencies operating in the EU, after criticism that they failed to spot the dangers in complex financial products.

Negotiation on the new systems has been long and difficult, with the UK in particular worried that they may intrude too far on national regulation and harm the competitiveness of the City of London.

There have also been Irish concerns about the impact on activities in the IFSC but, after the problems encountered there, Ireland was not in a position to argue strongly about the measures.

"We made it; the supervisory architecture train has left the station," said Sharon Bowles, the British Liberal Democrat MEP who chairs the parliament's economic and monetary affairs committee.

Irish Independent

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