But some supervisors are already expressing concern about the idea of granting powers of arbitration to the new agencies. "The current Commission documents leave many questions to be answered in the upcoming legislative proposals. For instance, what is on the table at the moment could be read as meaning that the proposed authorities might make supervisory decisions about individual firms," said John-Paul Dryden, EU policy adviser at the UK Financial Services Authority.
While supporting the need to improve the supervisory structure in Europe, Dryden believes the EC shouldn't give the Level 3 committees excessive authority over individual financial institutions when they won't bear the fiscal responsibility if things go wrong.
Another area of concern among supervisors is the EC's proposal that the ESAs should have the power to pass emergency measures, such as a short-selling ban, across the EU in the event of a crisis. "Crisis management on the European level would face serious challenges, because it might impinge on the fiscal responsibility of member states and additionally might not sufficiently take into account national nuances," said Thomas Steffen, the chair of Ceiops and the chief executive director of insurance supervision at the German financial regulator BaFin in Bonn.
But despite the reservations and widespread calls for more detail, the EC staunchly defends its plans and says they are the next step in attempting to create a single set of harmonised rules for the European financial market. "It would be absolutely wrong to suggest the Level 3 committees have failed in any way, we simply think this is an appropriate time to move European supervision up a gear. The financial crisis has crystallised some of the elements in the overall system that need overhauling," said Steve Ryan, financial services policy officer in the internal market and services directorate-general at the EC.
In addition to the ESAs, the EC proposes the creation of a European Systemic Risk Board, bringing together EU central bankers and regulators to monitor threats to financial stability. Those plans have also attracted criticism from national regulators who would be given only observer status on the board and would not be able to vote.
A public consultation on the reforms closed on July 15, but the EC will have little time to amend its final legislative proposals as they are due to be published and passed to the European Parliament and Council of the European Union on September 23. EC president José Manuel Barroso has expressed a desire to see the new framework become fully operational in 2010.See also: EU overhaul of financial supervision raises questions
De Larosiere calls for ECB to lead European macro supervision
Too many cooks?