15 June 2009

EU experts warn against regulatory failures of future financial markets legislation

“In the last few months, legislation has been drafted in a hasty manner", the Czech Deputy Finance Minister said. "Should this trend continue, there is a risk of serious regulatory errors despite the goodwill of all partners".

The Czech Presidency organised an international workshop on a "New Financial Regulatory Framework” in Prague. Participants discussed the newly-established architecture for financial market supervision, issues relating to hedge funds, rating agencies and insurance companies and, in particular, the political agreements of Ministers concerning the future organisation of financial market supervision.

 

“In the last few months, legislation has been drafted in a hasty manner“, Czech Deputy Finance Minister Klára Hájková said. "Should this trend continue, there is a risk of serious regulatory errors despite the goodwill of all partners,” she warned.

 

The conference pointed out the drawbacks in the concepts of regulation and supervision of multinational financial groups, including the limitation of systemic risks. Most of the participants agreed on the need to encourage the sharing of competence between national supervision bodies and the newly-proposed European authorities in the field of micro and macro-prudential supervision. Although the model of shared competence is not entirely consistent, it seems to present the only suitable alternative to a step-by-step disintegration of the internal market or total centralisation of supervision at European level.

 

CEBS said that the pan-European stress testing of financial institutions was struggling against the problem of differences in national legislations. National supervision bodies consider the testing to be merely a complementary mechanism running as a parallel to their own, more stringent tests focused on conditions at home. Banks should pass tests simulating the worst possible scenarios so that the market would no longer doubt their financial soundness.

 

The European Commission had to face severe criticism from the administrators of alternative pension funds and professional associations. They believe that the proposed directive concerning the majority of funds (which so far were unregulated) overhauls the market organisation too radically and could thus result in the delocalisation of this sector to countries outside the EU.

 

The regulatory framework provided for in the recently-adopted Solvency II Directive will introduce qualitative changes in the risk management of insurance companies. The conference participants nevertheless expressed their wish to maintain a part of the rules within the remit of the new European Insurance Agency on account of their excessively technical character instead of including them in the transposition measures of the Directive.

 

Press release

Speech by Klára Hájková, Czech Deputy Finance Minister

 

© Presidency of the Council