Unique supervisory model

EU lawmakers approve new supervisors for banking, securities and insurance

European Union lawmakers approved measures to create pan-EU supervisors for banking, securities and insurance firms.

The European Parliament voted to establish authorities in London, Paris and Frankfurt that would have the power to mediate between national supervisors and impose emergency bans of some transactions, such as naked short sales of shares and government bonds.

The European Commission proposed the new agencies last year as part of an overhaul of European regulation following the worst financial crisis since the Great Depression. Today's vote in Strasbourg, France, also paves the way for the creation of a European Systemic Risk Board, chaired by European Central Bank President Jean-Claude Trichet, to monitor markets and send warnings to EU nations on economic and financial risk.

"This is a historic, watershed achievement," Didier Reynders, the Belgian finance minister, said in a speech in Strasbourg. "It's a unique supervisory model."

Today's vote was the final stage in the approval process, allowing the new regulators to begin work at the start of 2011.

Finance ministers from EU member states approved the package at a meeting in Brussels earlier this month.

Supervisory model

"Europe will have a supervisory model adapted to its needs," Michel Barnier, the EU's financial services commissioner, said in a speech in Strasbourg today. "This is important for our citizens. They want to see that we've reacted to the crisis and taken the bull by its horns."

London will host the European Banking Authority, which will have the power to impose its decisions directly on financial firms if the U.K.'s Financial Services Authority, or any national regulator, fails to implement its recommendations.

The European Securities and Markets Authority will be based in Paris and have the power to investigate certain financial products, such as credit default swaps, and temporarily ban them. The systemic risk board and European Insurance and Occupational Pensions Authority will be both based in Frankfurt.

The approval of the agencies gives "reason for hope," Sony Kapoor, managing director of policy-advice company Re- Define, said in an e-mail, "especially if they are given an increasing set of powers and responsibilities" stemming from revamped EU financial regulation in the 27-nation EU.

(Published by Bloomberg - September 22, 2010)

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