The European Parliament (EP), following agreement by all member states, has voted through a new supervisory framework for financial regulation in Europe that will come into force in January 2011.
In his opening speech to the EP prior to the vote, internal market and services commissioner Michel Barnier said, “We are demonstrating that Europe can act quickly but efficiently and remain at the helm of G20 countries when it comes to financial reforms. Above all, we now have the structures necessary for those reforms, for that regulation – ongoing and in the future – to be more efficient.”
The framework is based on the original proposal made on 23 September 2009 by the European Commission and will consist of a new European Systemic Risk Board and three new European Supervisory Authorities (ESAs) for the financial services sector, including the European Securities and Markets Authority (ESMA) which will be based in Paris.
This will replace the Committee of European Securities Regulators (CESR), which is currently responsible for coordinating pan-European securities regulation. CESR has advisory powers and can only issue non-binding guidelines and recommendations.
ESMA will have more power, being responsible for developing proposals for technical standards, resolving cases of disagreement between national supervisors where legislation requires them to co-operate or to agree, ensuring consistent application of technical community rules and exercising direct supervisory powers for credit rating agencies.
The other ESAs, the European Banking Authority (EBA) which is to be based in London and the European Insurance and Occupational Pensions Authority (EIOPA) which is to be based in Frankfurt, will share these responsibilities with the exception of supervising ratings agencies.
The new authorities will be made up of the 27 national supervisors. This framework is intended to give Europe the ability to detect the risks which can accumulate across the financial system as were witnessed in the run up to and at the height of the financial crisis.