19 May 2009

BIS Wellink – burden sharing essential for stronger supervisory agreements

Generally supporting proposals towards supra-national supervision in Europe, the BIS chair noted that burden-sharing arrangements have to be agreed first before transfering any decision-making powers to the international level.

"The most important requirement on the way to creating stronger cross-border supervision in Europe concerns the issue of burden-sharing", BIS Chairman Nout Wellink, commenting on the de Larosière report, said at the at the Economics Conference in Vienna. “Indeed, the Achilles' heel of this part of the De Larosière report is that too little is said about this central issue”, he said. “Before we can transfer decision-making powers to the international level, we really should first agree on burden-sharing arrangements”.

 

Wellink supports even more far-reaching proposals towards supra-national supervision in Europe only if the necessary requirements for such a historical move are fulfilled.

 

“Regarding the suggested mandate, there is the notion that the Council should refrain from giving binding macro-prudential policy recommendations”, Wellink said pointing to the fact that the Risk Council itself has no responsibility or any decision-making powers when it comes to regulation, financial supervision, and monetary and fiscal policy.

 

The BIS chair recommended coming up with a clear definition of macro-prudential analysis in the first place before determining the scope of the Risk Council’s mandate. The Risk Council should also have access to the necessary information, although there are constraints to information-sharing, he noted.

 

However, contrary to what the De Larosière group proposes, these conclusions made by the Risk Council cannot – for reasons of governance – be binding, Wellink underlined.

 

Pointing to the composition of the Risk Council the BIS chair recommended that the chairs of the European 3L3 Committees (the future Authorities) should become full and permanent members. “An issue to address is whether the national supervisors should have voting rights”, he said. “Here I hesitate”, Wellink underlined, “after all, macro-prudential supervision is the primary responsibility of central banks.”

 

Full speech

 

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