Intervention prononcée par Pervenche Berès le 7 mai dernier lors de la conférence organisée par la Commission européenne sur l’avenir de la supervision.

« Towards a new supervisory architecture in Europe »

1. Let me first thank the European Commission for the opportunity to speak today on the new supervisory architecture in Europe, a topic that I consider of utmost importance. I believe that the majority of this audience agrees with me that supervision is one of the most the urgent and critical issues we need to address and that will be one of the first one to be deal with by the newly elected Parliament.
I must also express regret on behalf of many of my colleagues from the European Parliament that today’s conference coincides with the last plenary session of this Parliament, and therefore not all who wished to, can be here with us.
The European Parliament organised a hearing on the topic we are discussing today on April 24th and no later than today President Pˆttering wrote a letter to President Barroso to inform him of the Parliament’s strong support for the recommendations put forward by the de LarosiËre group and to call for quick legislative action to translate these recommendations into reality.

2. Yesterday, the European Parliament adopted in single reading two important pieces of the supervisory debate: the new report on the CRD , where we clearly state in the review clause our ambition for an integrated system with binding powers, and a report on the financing of the 3L3 Committees. The introduction of this Community program to finance –amongst others- the 3L3 committees answers a longstanding request by the European Parliament that had, up to now, been rejected by the Commission as impossible. The negotiations enabled us to improve this Community programme in so far as the level of financing for the 3L3 committees has been raised and the distinction between action grants and operational grants deleted. Moreover, the Parliament will have a strong role in overseeing the implementation of this programme.

3. In my contribution I shall react on the recommendations of the de LarosiËre Report. I will do so very gladly.  The European Parliament has, in its resolutions, long called for a « wise men » group with a mandate to look at the missing part of the Lamfalussy mandate –the EU supervisory architecture with due regard to financial stability.

4. Allow me to make first a few comments:
This crisis has shed light on several weaknesses of the status quo. And I am referring not only to the numerous regulatory failures that must be addressed, but also to some Member States actions. The lack of coordination of Member States’ responses was and remains striking. So is the growing number of voices questioning whether the high level of integration in Europe is in fact “a good thing”? Some Member States converted from “European” to “everyone for himself”.

5. “The risk of market fragmentation and “balkanisation” is real,” that is the message I hear in corridors and from speaker’s tribunes. And I am deeply concerned.
The EU is a deeply integrated market where companies and financial institutions are encouraged to operate on European scale. That is our strength, event though we should never forgot that it is not the EU’s main objective! That is what makes out of the European Union the largest market/key player in the world!
The single market and single currency are big achievements of the European project. No doubt about it!  And we shall not forget this! Without them, dealing with the financial crisis would have been much more difficult! The damage encountered by some EU countries would have been far greater!
The EU must learn the lessons from these difficult days! I see no alternative but going forward and strengthening the European project. It would be a fatal mistake if after this unprecedented crisis we did not finally succeed in revamping the EU regulatory and supervisory framework!

6. The debate on the new supervisory architecture in Europe is not a new one, it has been on the table since Baron Lamfalussy’s work, but the crisis has given us the political momentum and also the responsibility to tackle it. It remains delicate and sensitive. So was a debate on the Economic and Monetary Union. We should take inspiration and wisdom from the “Delors method”.  Had we asked at the time the question « Yes or no to the EMU », certainly, the project would have never succeed. Instead, the Members of the Delors Committee asked: « How, from a technical point of view, can we achieve an economic and monetary union? » We should follow this example. We should not ask ourselves whether to take the route of further integration or not. At this stage, this would be a waste of time and a serious mistake. Instead, we should ask ourselves « How, from a technical point of view, can we reform the existing supervisory and regulatory architecture in the EU so that it better corresponds to the level of integration in the EU and enhances the stability and soundness of the entire system? What elements should it comprise? What should be the steps to undertake to get there and in what order? »

7. The de LarosiËre Report provides answers to those questions. It opts for evolution rather than revolution, although I have always been a supporter of the revolutionary approach. Looking at the mandate, which was not to solve the current crisis, and at the composition of the de LarosiËre Group with its diverse profile and strong personalities, I believe this result is a significant achievement. We should also bear in mind that the report has been adopted by unanimity. It puts forward a pragmatic and realistic plan and provides the line for reforming the EU supervisory architecture and financial services regulatory framework. If the EU wants to deliver, this is the base for action and no more academic discussion should be aloud

8. It rightly stresses the importance of macro-prudential supervision, a reformed EU supervisory framework, financial stability and systemic risk. Setting-up a new body in charge of the macro-prudential oversight of all sectors with a clear definition of the role of the ESCB, and upgrading the Level 3 Committees to European Authorities, is fully in line with Parliament’s position, elaborated these last years and formalised in October 2008.

9. Given the need to advance in the areas highlighted by the Report, the Commission should come forward without any further delay with appropriate legislative proposals to put the recommendations in place.  Within this process, a proper consultation and involvement of the European Parliament is crucial for preserving the institutional balance. The Interinstitutional Monitoring Group, which was set up to follow closely the implementation of the Lamfalussy report, proved to be a very efficient tool in this regard. The European Parliament therefore calls for setting up a new interinstitutional monitoring group mandated to follow the process of putting in place the de LarosiËre Group¥s recommendations.

10. As I said earlier, the de LarosiËre report recommendations should be seen as baseline for the reform. Some issues will require further consideration and reflection, they will need to be addresses with strong willingness to as ambitious and realistic as possible.

1. The European structure/body in charge of macro prudential supervision must be granted an independent status and be well equipped with highly qualified staff. Full access to all relevant information and confidentiality must be ensured. A strong link between macro-prudential and micro-prudential level must be established. The mandate of the body must be clear as well as its instruments and the authority to use them. Its policy assessments and signals must be taken seriously, recommendations followed-up and implemented at micro-level. This is a crucial, though very sensitive issue. To this purpose, clear procedures must be established and thoroughly followed.
2. At the micro-prudential level, supervisory powers need to be harmonised in order to successfully upgrade the Level 3 Committees into European Authorities.
3. Furthermore, the reform of the micro-prudential supervisory architecture must go hand in hand with the [ongoing] regulatory reform. In other words, it must reflect any extension of supervisory oversight to the shadow financial system and non-regulated systemic entities.
4. A thorough reform of the EU crisis prevention, crisis management and crisis resolution arrangements must be conducted in parallel with the reform of EU macro and micro prudential supervision. This means, amongst others, setting up an early intervention mechanism (a sort of prompt corrective action) at EU level, tackling the issue of shareholders rights when financial institutions face serious difficulties and require government support, addressing obstacles to cross-border asset transferability and establishing a framework for resolving financial groups (to allow winding up of institutions across borders) and last but not least, progressing with burden sharing arrangements (i.e. making them effective and binding). Otherwise, we will continue to turn in a vicious circle.
5. These reforms also have an institutional dimension. The board members and leadership of the new supervisory bodies need to be accountable to the EU institutions and Parliament has to have a say in their appointment and on the oversight of their work.
   Moreover, I have the strong belief that the Commission’s own structure and organisation should be reformed to draw the lessons of the crisis. We can’t proceed with 2 separate DGs in the Commission that deal with macroeconomic aspects on the one hand and with microeconomic aspects on the other. I call for the integration of the financial services to DG Ecfin, to prevent bad legislation that doesn’t address the whole dimension of certain issues. The most recent example I want to take here is the one of the Commission’s proposal for a directive on alternative investment fund managers. I won’t enter into the detail of my criticism of this draft directive, but let me say that it only focuses on investor protection and completely omits the objective of ensuring financial stability. I have the belief that if financial services were tackled within DG Ecfin, this wouldn’t have happened.

11. The Commission outlined in its Communication of 4 March 2009 « Driving European Recovery » the first steps envisaged in order to put some of the recommendations of the de LarosiËre Report in place. Namely, to present by the end of May 2009 a European financial supervision package aiming, first, to establish a European body in charge of macro-prudential oversight of the stability of the entire financial system and, secondly, to present a proposal on the architecture of the European financial supervision system.  I believe such proposals are a good starting point, but as I said earlier, much more must be done.

Let me conclude.
The time of reflection has been long enough. It is time to act and it is time to be ambitious to make our financial system sound and stable.
The recommendations of the de LarosiËre Report are clear. It is time to pass swiftly to the next step – to their implementation.
It is time for the Commission to use this vision, to translate it into concrete proposals and to put forward a plan for a reformed and strengthened EU regulatory and supervisory framework, which is capable of facing the challenges and weathering the financial storms in the 21st century.
But this ambition requires a comprehensive approach that doesn’t restrict itself to the area of financial services. We also need to think over the internal market and to complete it by addressing the issue of taxation. Otherwise, we run the risk of protectionist policies and national answers to common challenges, which will only make things worse.
The G20 conclusions are a good starting point in this ambitious reform agenda, but they offer a baseline, not a target. Europe needs to make further progress for itself and also in order to put itself in the position of a global advocate of sound regulation and supervision.
The European Parliament looks forward to playing its role in this legislative process.