Cold shower for European Financial Supervision changes

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Looking at the Presidency briefing, today’s ECOFIN discussion on European financial supervision promised to be difficult. It suggested that “Whereas some member states support the proposed reforms, a number of others are critical. In their view, the proposals don’t reflect the results of the Commission’s public consultation, and are insufficiently justified by its impact assessment. Concerns have also been expressed about the complexity of the proposals, and the additional burden this will place on market players.

For those campaigning for moving towards a completely European financial supervision landscape, don’t get your hopes high. This morning in Brussels, Finance Ministers pretty much gave the Commission’s not-so-ambitious proposal to reform the European Supervisory Authorities’ (ESAs) powers a very cold shower, arguing it goes much too far in terms of centralising financial supervision with the ESAs.

Ministers suggested the Commission proposal could be overstepping its legal basis (Article 114 TFEU) and might also be incompatible with the Meroni doctrine – to be checked by the Council’s legal service. Small member states expressed the concern that giving more powers to the ESAs themselves rather than their Boards (consisting of the national supervisory authorities) would “shift power away from the national level but leave the responsibility there“, as the Hungarian Minister of State for Financial Affairs put it. Others argued that elements of the Commission proposal were not part of the consultation prior to the proposal.

But most of all, it’s another example of subsidiarity being a subjective concept. Clearly, most member states think the Commission has made the wrong assessment and believe that European financial markets are currently quite well-regulated at the national level, by supervisors who know the local market and language.

Watch the debate here. Full formal conclusions from the meeting here.