New financial and insurance European supervisory authorities and a European systemic risk board keep national regulators at the fore whilst ensuring a common rulebook to prevent future economic crises.
The new bodies will be will be up and running by January 2011, and will have the ability to mediate disputes between national supervisors, to guide national regulators, and to monitor how national authorities implement EU legislation. There will be a new common set of indicators to permit fair and open comparisons between cross-border financial institutions and send out appropriate warnings.
MEP Dr Kay Swinburne says, "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 rulebook and greater certainty over the key questions of who will regulate what and where. 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. This package must be seen as the high-water mark of European financial supervision and not the first step towards handing over these powers to Brussels. With this new certainty the financial markets can begin to look to the future."
The European Insurance and Occupational Pension Authority will be based in Frankfurt. Although their powers will be limited when they open their doors next year, they will grow in authority as the EU rolls out its program of financial reform. Lord Turner of the soon to be abolished Financial Services Authority has already moaned about the new authorities-but if the FSA and other regulators had actually done what they were supposed to do in protecting the public three years ago, there would be no need for new EU regulators.