Are the new European regulators starting to squabble?
In the aftermath of the 2008 financial crisis, the EU revamped its financial supervision framework and created three new European Supervisory Authorities:
- The European Banking Authority in London,
- The European Securities and Markets Authority in Paris,
- The European Insurance and Occupational Pensions Authority in Frankfurt
On top of all this is a European Systemic Risk Council, which is chaired by the ECB president and is responsible for monitoring systemic risks, i.e. supposedly making sure nothing falls through the cracks between the three regulators.
Below all these sit all the national regulators, e.g. the FSA, BaFin, CBFA etc. Inevitably, determining who does what and who is responsible could be an issue in more than one case, distracting these agencies from actually regulating financial institutions. A situation similar to the UK tripartite regulatory system comes to mind, where everything was working well until it wasn’t anymore.
Reading between the lines, it seems that the first signs of such a struggle between these agencies has started. This week the EBA announced it would propose to senior EU officials to have the European Financial Stability Facility (EFSF), created in the wake of the sovereign debt crisis to help out governments, guarantee bank bonds, to alleviate funding stress. This would require a change in the EFSF’s powers, and German regulator BaFin were very quick to disagree with this:
Bafin said it is aware of plans by the EBA to request extra powers for the European Financial Stability Facility (EFSF).
This is not the task of the EBA, a spokesman for Bafin said.
Hopefully this is only a one-off and it will not prove to be a model for the future interaction between regulatory agencies; for if it does one is entitled to worry about the future quality of financial supervision in the EU.
