Supervising the supervisors

One of the biggest challenges of the new Belgian Presidency will be to broker a deal on the new European financial supervisory architecture. To do so would represent a major victory for European policymakers as global discussions on the prevention of another financial crisis continue. The Presidency thus faces a busy summer: this week EU finance ministers watered down the EU Parliament’s calls for the three new watchdogs (banks, insurers and asset managers) to have greater powers and be able to overrule their national counterparts. Under the Council agreement, such an overrule should only take place if EU law has been breached.

As negotiations on the package continue, the issue of where the new authorities are to be based become important bargaining chips. While MEPs have called for all three to be situated in Frankfurt, in close proximity to the ECB, ministers agreed they will be split across the Germany finance capital of Franfurt, Paris and London. My guess is that the influence of the French insurance industry within its national Treasury may well result in the insurance supervisory authority moving to Paris. This would leave a straight shoot out between London and Frankfurt for the most prized possession, the European Banking Authority. It will be a mark of George Osborne’s negotiating skills as to whether he can convince European partners to support his campaign to protect the sovereignty of the Bank of England.

Michael Cooper
Senior Consultant

July 16 2010