EUROPE - The European Commissioner for Internal Markets and Services has raised concerns about the effectiveness of the financial services regulatory regime in light of the recent credit crisis, but doubts the prospect of an EU-wide regulatory body.
Speaking at the Eurofi Conference in Brussels yesterday, Charlie McCreevy, from the Internal Markets and Services DG described the existing financial services regulatory framework as "out of date" for dealing with large cross-border banking groups and has suggested a system should perhaps be considered giving "a college of supervisors" responsibility for large banks, rather than local regulators.
"Insofar as supervision of EU financial institutions is concerned, the current financial turmoil must be a wake-up call for everyone. On the positive side, our regulatory framework has held up well. Nevertheless, the effect of the sub-prime crisis have resulted in a small number of national financial institutions having to be bailed out," said McCreevy.
He continued: "Our regulatory framework is still based on a national system that is frankly out of date in regard to the structure of our largest financial bodies. This needs urgent attention.
"The Northern Rock saga holds many lessons for us all. I would hate to think what might have happened if Northern Rock had been a significant player in a number of member states," he added.
McCreevy stopped short of backing recent calls from the Italian finance minister, Tommaso Padoa-Schioppa, for a single European financial services regulatory body, however, arguing the political impetus across the region is unlikely to allow such a move.
"Some would argue that an EU-level supervisory body is the best way to address these issues. There are strong arguments for an against an EU Supervisory Agency," said McCreevy.
"I am not coming down on one side against the other. But my political antenna tell me there is no chance that we would find agreement on an EU supervisory agency. However, I do agree strongly that we cannot let the present system continue as it is. In the area of supervision, I have always argued that evolution, rather than revolution, is the best way forward."
The UK's Economic Secretary to the Treasury, Kitty Ussher MP, also appeared to brush off claims of a need for tigher regulation across Europe, yesterday, during a speech on financial services in London.
"We won't move away from the smart, proportionate, risk-based approach to financial services regulation that has contributed so much to London's strength," said Ussher.
"We think that the tripartite structure is one of the factors that has contributed to Britain's economic successes over the last 10 years - although of course we will look at what lessons there are to learn," she added.
Instead of an EU-wide regulatory body, McCreevy proposed "a college of supervisors for each cross-border banking group", similar to that applied to LIFFE and Euronext, would be more appropriate.
Under this system, officials would meet regularly and share information, and then take a coordinated general approach should problems at a firm surface, he suggested.
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