17 Dec 2008, David Benyon, Operational Risk & Regulation
An in-depth inquiry will look into the role of EU financial regulation, the effectiveness of the proposals and further EU-level responses. It will look into the possibility of EU supervisory reform, which could take the form of a European system of financial supervisors or a central European authority to supervise pan-European financial groups. The effectiveness of home-host group supervision across the EU market will also be assessed.
Future legislation will also be looked at. Controversy has arisen over depositor protection schemes and the possibility of EU-level rules regarding the central bank as 'lender of last resort', as European countries' have taken diverse approaches to this issue in the past three months. The opportunity for a revised EU directive, including intervention triggers tied to a liquidity or leverage ratio, will also be investigated, in addition to a review of current state aid rules for banking and legislating procedures for bank insolvency.
The wider requirements for a global supervisory system in response to the turmoil will also be discussed - most notably through existing channels offered by the G-7 Financial Stability Forum, G-20 group of ministers, and the International Monetary Fund (IMF).
The report may be read by clicking here.