20 March 2009

European Council Conclusions 19-20 March

Council agreed  the de Larosière report as "the" basis for action and will adopt first decisions by June 2009. Council also agreed to give priority to restoring the functioning of credit markets.

Council agreed to speed up agreement on pending legislative proposals on the financial sector and called for a strong EU initiative in reviewing international accounting standards.

 

In June, the European Council will take first decisions to strengthen EU financial sector regulation and supervision, to be based on Commission proposals following thorough discussion in the Council on the de Larosière report. Critically, the European Council agreed unanimously that "the report from the High Level Group on financial supervision chaired by Jacques de Larosiere is the [editor's emphasis] basis for action." [Editor's note: UK Prime Minister Brown signed these Presidency Conclusions so it must now be assumed that the alternative proposal contained in the UK letter sent to ECOFIN members on 3rd March has been dropped.]

 

Council also defined the Union's position with a view to the G20 Summit in London on 2 April.

 

With regard to the de Larosière report and financial sector regulation and supervision the Council will adopt first decisions at the June 2009 European Council. More detailed legislative proposals will follow in the autumn.

 

Work should also be taken forward speedily on the forthcoming Commission proposals on hedge funds and private equity, on executive remunerations and on further strengthening capital requirements.

 

With regard to impaired banking assets the European Council calls on the Member States “to act in a co-ordinated manner and in full respect of competition rules” on the basis of “full disclosure to supervisory authorities”.

 

By June 2009, an assessment of the effectiveness of the measures taken as well as the overall situation regarding the stability and functioning of financial markets should be undertaken. “With regard to the banking sector, support for parent banks should not imply any restrictions on the activities of subsidiaries in EU host countries”, Council concluded.

 

Council underlines the need to strengthen prudential rules, crisis management arrangements and the supervisory framework at the national, European and global levels. Furthermore, the FSF, Basel Committee on Banking Supervision and Commission are urged to accelerate their work and to swiftly submit appropriate recommendations.

 

Council and European Parliament are called to reach agreement before the parliamentary recess on the still outstanding legislative acts, namely on CRAs, Solvency II, CRD, and cross-border payments and electronic money.

 

G20 Common Position

European Council defined its common language for the G20 meeting on 2 April in London and agreed to give priority to restoring the functioning of credit markets. Markets should be kept open and protectionist measures are to be avoided.

 

Council also agreed that macro-prudential supervision a standard part of the financial sector oversight. It calls for appropriate regulation and oversight of all financial markets, products and participants that may present a systemic risk, without exception and regardless of their country of domicile. This is especially true for private pools of capital, including hedge funds, private equity and alternative investment vehicles.

 

Credit rating agencies should be properly regulated and supervised in an internationally consistent manner.

 

Further issues include:

Ø       transparency and resilience of CDS markets (including central clearing counterparties),

Ø       common principles on corporate governance and remuneration practices,

Ø       rapid establishment of colleges of supervisors for all major cross-border financial institutions before the end of 2009,

Ø       improve the regulation relating to banks' capital,

Ø       improve prudential rules and accounting standards,

Ø       rigorous enforcement of financial regulation and transparency,

 

Council conclusions

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