Authors Iain Begg | Gabriel GlÃ¶ckler | Anke Hassel ... - The Europaeum

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financial market rules. The ESFS authority over the European financial system would guard against the inadequacies or “capture” of national regulators. Most importantly, it would ensure the sufficient scale of operation necessary to prevent or effectively confront cross-border European-level systemic banking crises. The ESFS should be modeled as a single, integrated, cross-sectoral financial market supervisory institution, comprising banking, insurance and securities market supervision under one roof. Integrated financial supervision also makes sense in view of the process towards creating a pan-European capital markets infrastructure, with consolidated stock exchanges, clearance and settlements systems, and so on. Given the desirability of incorporating supervision of the city under a European supervisory scheme, the ESFS has the advantage of being able to play this role better than the ECB, for as long as the UK remains outside the Eurozone. There are some good reasons for assigning financial supervision to an institution separate from the ECB. According to a familiar argument, a conflict of interest may exist between financial supervision and central banking, in that a central bank may be tempted to loosen its monetary policy in order to bolster the banking system. It is also important that each institution retains a clear and unambiguous mandate that won’t lead to conflicting objectives or create risks that might undermine credibility in one area as a result of promoting the other. The information acquired by a central bank’s participation in the money market and foreign exchange dealings can be shared with the financial supervisor, in a structure of close interaction between the two and the financial industry, without the central bank having to perform a supervisory function. And successful rescue operations can be performed with the ECB in a central role (coordinating private creditors and public funds) without necessitating a joint supervisory function, which can be carried out by a distinct institution. Finally, a clear division of labour between the ESCB and the ESFS would help ensure a coherent communication strategy, an institution speaking with one single voice to the markets (“one voice policy”), avoiding conflicting messages and mixed signals emitted in situations of crisis. 17 As the ESFS solution leaves local supervision to national authorities, some have criticised it as an inadequate substitute to a fully-fledged central super-regulator. However, complete regulatory centralisation is not politically feasible; and probably not even desirable either. The ESFS as a structure has the potential to lead to deeper integration. By ironing out 38 After the crisis: A new socio-economic settlement for the EU
egulatory and supervisory differences, harmonising supervisory standards and reigning on discordant national supervisors, the ESFS could gradually mature into a powerful EU-wide regulator. The ECB as macro-supervisor A second alternative would be to assign supervisory powers to the ESCB, an option compatible with EU Treaty provisions. This would also allow the ECB to better pursue the parallel task of financial stability. Article 105.6 of the EU Treaty provides the possibility of transferring prudential supervision of banks and other financial institutions (except for the insurance industry) to the ECB. In such an event the ECB should be assigned full powers of macro supervision. The ECB would not become the sole supervisor of banks but act “within a single institution” with national market supervisors and central banks so that broader financial stability supervision is combined with the day-to-day oversight of individual banks. 18 The distinction between macro and micro-supervision is necessary in order to comply with the subsidiarity principle. From the ECB’s standpoint, the macro-prudential authority has to have access to micro-prudential information and vice versa; an exchange of information that can be better achieved within a single institution. 19 The ECB for its part would be willing to play a role in micro-prudential supervision as well but nobody should expect it to supervise markets. One obvious weakness with this option is that it is not very favourable for countries, like the UK, who are not in the Eurozone. An additional weakness of the solution of assigning supervisory functions to the ECB according to article 105.6 is that the Treaty explicitly delimits the ECB’s new supervisory role to “specific tasks” related to banking supervision – excluding the insurance sector. This represents an inferior arrangement when compared to a full “blanket” supervisory authority which covers the entire financial system. Regulatory interventions for promoting financial stability Regulatory and supervisory policies have a major impact on the size and nature of the information asymmetries involved in the functioning of financial markets. Disclosure requirements for securities, regulatory standards for bank capitalisation, and supervisory practices, all influence and seek to improve the risk/return characteristics of investment. 20 In principle, not only banks but any financial institution subject to systemic risk must be covered by regulation. Highly leveraged hedge funds when moving together as a herd generate systemic risks, thus requiring macro- Chapter 2 – George Pagoulatos 39
Page 1 and 2: Authors Iain Begg | Gabriel Glöckl
Page 4 and 5: Published in 2009 by Policy Network
Page 6 and 7: 4 After the crisis: A new socio-eco
Page 8 and 9: 6 After the crisis: A new socio-eco
Page 10 and 11: Simona Milio is associate director
Page 12 and 13: Chapter 10 Simona Milio ...........
Page 14 and 15: Before the crash: the EU as a parti
Page 16 and 17: liberalisation. The City of London
Page 18 and 19: of the Financial Services Action Pl
Page 20 and 21: confidence and world trade, to whic
Page 22 and 23: following the ECJ’s controversial
Page 24 and 25: signals are in place to promote a n
Page 26 and 27: need to be constructed to create ac
Page 28 and 29: or indeed re-impose, what they rega
Page 30 and 31: Markets with rules The overall conc
Page 32 and 33: 30 After the crisis: A new socio-ec
Page 34 and 35: Target financial stability The EMU
Page 36 and 37: Belgium, the Netherlands and Luxemb
Page 38 and 39: mortgage banks and the insurance se
Page 42 and 43: prudential regulation - though only
Page 44 and 45: initiatives vis-à-vis ratings agen
Page 48 and 49: Even if membership in a monetary un
Page 50 and 51: emained relatively contained to spe
Page 52 and 53: The second channel of functional sp
Page 54 and 55: But even so, the depth and intensit
Page 56 and 57: governance in the EU and the euro a
Page 58 and 59: in the EU show, authorities at the
Page 60 and 61: factors will remain prevalent and b
Page 62 and 63: centralised decision-maker. Similar
Page 66 and 67: (GNI), the interests of the member
Page 68 and 69: terms only very slowly and as a per
Page 70 and 71: policy proposal asks itself what th
Page 72 and 73: ensure that a ceiling is put on the
Page 74 and 75: Reform of EU expenditure Spending 4
Page 76 and 77: The medium-term financial framework
Page 78 and 79: unanimity. The need to obtain the c
Page 80 and 81: therefore, was weakening the Europe
Page 82 and 83: for the signing of the strict and d
Page 84 and 85: Since then, member states have name
Page 86 and 87: in the world monetary system. It al
Page 88 and 89: a Treaty that not only ignores trad
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88 After the crisis: A new socio-ec
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Firstly, they should include policy
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emanate from demographic trends. Ho
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Furthermore, the Lisbon agenda may
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Strengthening, if not really crafti
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incentives in the welfare schemes a
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security, yet at a lower cost than
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102 After the crisis: A new socio-e
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asis only in the 1990s, and over th
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in an increasingly global age the
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So what kind of social role for the
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effective common policies in areas
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help by ensuring a thorough audit a
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irrespectively of benefit and costs
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to the European Innovation Scoreboa
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flexible labour regulation than cou
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to cope with change is germane to a
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average job tenure figures in the E
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(74), and road vehicles (78). On th
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Towards a less dogmatic approach Wh
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will be reinforced rather than cont
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Where do we come from? The EU agend
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However, so far the flexicurity app
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existing practices of wage subsidie
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minimum wage tend to have higher pr
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commitment for employment”, 18 un
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provisions for minority protection,
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eflected in the objective of the Li
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instruments have been criticised fo
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However, the countries’ planning
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ich developed country pre-occupatio
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emerging markets (indeed the rules
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Energy and carbon use depend on fou
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concentrate on the size of the cake
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esurgence of long-term unemployment
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22 Financial Services Authority (FS
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7 This idea is not new. The 1970 We
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33 Arpaia, Alfonso, Declan Costello
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9 See Garabiol-Furet, M.-D. (2006)
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Chapter 11 1 Victor, D.G. (2006)
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Authors Iain Begg | Gabriel GlÃ¶ckler | Anke Hassel ... - The Europaeum

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