The European Union Plan for a Financial Watchdog

The European Union has recently revealed plans for an overhaul of the way financial institutions and financial markets are policed a central plank to new rules to prevent a repeat of the global economic crisis that has occurred recently. The European Union plans to create a banking super-watchdog, with power to overrule countries such as Britain and a pan-European supervisor that would warn of any early signs of a crisis.

The laws which also include the creation of a separate supervisor for insurers and markets, are set to give more say then ever to European institutions as Brussels tightens its grip on an industry blamed by many for triggering the economic slump. The blueprint, which is the result of an agreement reached by European Union leaders earlier this year, could erode the authority of such powerful countries of Britain (which is currently fighting to keep control over the centrepiece of its economy, the City of London.)

The rules need the approval of the 27 European Union National Governments and the European Union to take effect. Overhauling the way Europe’s banks and financial services are policed is central to legislation the European Union has drafted to prevent anew financial crises. It is part of a broader range of legislation ranging from curbing of banker bonuses to forcing lenders to make greater financial provisions for hard times and could break the mould of financial supervision in Europe.

The plans for such an initiative rest on the backing from Great Britain (home to Europe’s biggest financial centre, the City of London). Its backing will be crucial to plans to set up new structures by the end of 2010. Britain has expressed concerns about such an aspect because the legislation will give more power to European Institutions.

For example the risk board which would be staffed by the European Central Bank and based in Frankfurt Germany, is likely to have a wide range of powers and they are as follows:

• It will be able to issue warnings stating what should be done about risks in the financial system.
• It could order a member state to take action and the member state would be required to explain itself if it did not do so.

 

 

 

 

 

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