The ECB would chair a group of European central banks in charge of macro-prudential supervision - monitoring the European financial industry for signs of another financial crisis. Meanwhile, at the micro level, three new bodies would formalise existing cooperation between national regulators: the European Banking Authority, the European Insurance Authority and the European Securities Authority.
The proposals, published today by the European Union's High Level Group on Financial Supervision, blamed national regulators for paying insufficient attention to system-wide issues such as liquidity and transparency in the run-up to the crisis. The group, chaired by Jacques de Larosiere, a former managing director of the International Monetary Fund and former governor of the Bank of France, also called for reform to the Basel II capital adequacy rules, which they condemned as procyclical, and for tighter regulation of credit rating agencies.
Additionally, the group backed calls for central clearing of credit default swaps (CDS): "at least one" clearing house should be set up in the European Union, it said, though not necessarily in the eurozone; however, the ECB should be involved in supervision, as 80% of CDS trades were euro-denominated, the group added.
See also: Liffe blames regulatory uncertainty for lack of CDS clearing
Banks agree to EU CCP for clearing CDS
European CDS regulation 'inevitable' - EC official
EC pushing for rating agency regulation