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The Commission adopted a communication on adapting European and global financial systems to better promote financial stability to contribute to the Spring European Council on March 13-14. The communication asks the Spring European Council to build on this road map agreed in October 2007 and “go one step further” by confirming the principles which will guide the EU internally and in international fora.
Those principles should include:
- primary responsibility for managing risk rests with individual financial institutions and investors;
- national regulatory and supervisory frameworks must be equal to the task of coping with rapid change and innovation in financial products;
- cooperation between regulatory authorities in the EU and globally must be stepped up.
The Commission also wants the European Council to endorse a series of lines of action both in terms of internal policy and in international fora. These include:
- improving information provided by credit ratings agencies, by taking regulatory measures if the agencies do not act voluntarily;
- updating accounting and valuation rules, so that full information on the exposure of banks and other financial institutions to off-balance sheet vehicles is made available;
- encouraging prompt and full disclosure of losses by financial institutions;
- improving early warning systems on financial stability;
- fostering the effectiveness of EU networks of financial supervisors and ensuring strong and effective supervision of cross-border groups;
- working on a common framework for assessing the systemic implications of a potential crisis.
The Commission wants a political agreement with the Council and the European Parliament to deliver the necessary legislative changes before April 2009.