In a speech given in Milan, Lorenzo Smaghi, Member of the ECB Board outlined the Lamfalussy process asking whether financial market developments necessitate substantial improvements in the quality of the European regulatory set-up.
Current developments in financial markets are causing two types of problem to emerge, he said.
“First, the continual integration of markets increases the inefficiencies resulting from a variety of laws, or applied in different ways in different countries”, Shmaghi outlined. “Second, the possibility of applying the laws in various ways reduces the incentives for proper coordination between national supervisory authorities in respect of the prevention and resolution of crises.” He concluded that the reasons for justifying differences in legislation, and differences in the applications of European laws, are getting weaker by the day.
“Rapid progress is needed towards a single regulatory approach, applied in the same way throughout the single European market”, he said. “This is what the market wants, what the banking and financial institutions want and what their customers want. This is also necessary in order to remove the disincentives to closer cooperation between the national supervisory authorities.”
“In my opinion, it is possible and necessary to work inside the current system to adopt, in reasonable times, a common rulebook at European level which constitutes a clear point of reference for financial institutions when performing cross-border services and which is applied uniformly by the national authorities”, Smaghi concluded.
“If sufficient progress were not to be made within the current system, the trends under way in the markets could determine a situation in which the only alternative, in order to safeguard the integration and stability of the market, would be a radical review of the European institutional framework in favour of a greater concentration of powers.”
Full speech
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