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Rapporteurs Ieke van den Burg and Daniel Dăianu propose a comprehensive reform of current EU regulatory and supervisory arrangements and request the Commission to come forward by
The report states that existing financial market regulation and supervision could not cope with the financial crisis, and that poorly regulated capital market intermediation and the shadow banking system have emerged as new sources of systemic risk.
The paper requests a first set of recommendations on a number of concrete measures including on the capital adequacy framework, and accounting rules, on transparency issues with regard to securitisation, complex financial products and unregulated markets, as well as on governance issues such as remuneration schemes, and corporate liability regimes, and the application of differentiated symbols for rating products.
A second set of recommendations targets systemic risks measures and calls for an increasing role of the ECB. Also, the EU prudential and regulatory framework should be extended to leveraged entities regardless of their legal form or seat. Further issues relate to deposit guarantee schemes for banking and insurance, the set up of a ‘risk absorber’, and the introduction of a (Tobin) tax.
The third set of recommendations introduces a new supervisory structure on which the Commission is requested to come forward with proposals by autumn 2008.
In particular, mandatory colleges of supervisors shall be required for the largest cross-border financial institutions which will decide and vote on the basis of qualified majority voting. For the coordination and mediation a permanent EU college coordination and mediation committee (CCMC) should be established.
In parallel, the existing 3L3 Committees should be granted the status of supervisory agencies and should be headed by a presidium to coordinate between the agencies and sectors and cooperate with the ESCB and the ECB for the purpose of coordinating financial stability issues.
Finally, a new EU financial stability oversight body should be established composed of the chairs of the 3L3 committees, the chair of the new CCMC, the chair of the presidium and representatives of the ECB to provide early warning signals and act as rapid reaction force in case of a threat to financial stability.