Barnier: binding remuneration rules across the financial sector would be an incentive for taking less risk
17 February 2010
The immediate priority for Europe is concluding unfinished business. This includes equipping it with effective regulation for alternative investment funds and enforcing the EC's supervisory package proposal based on the Larosière Report.
The preparation for his new post have left Barnier with a number of priorities:
1. An immediate priority: concluding unfinished business: we need to equip Europe with an effective supervisory system and effective regulation of alternative investment funds.
The facts are simple: The EC made proposals based on the Larosière Report. The Council reached agreement. The Parliament is now working on the issue and will provide added value: that is its role. Then, together, we will need to quickly find the right balance. For that, all sides will need to display openness and flexibility.
A lot is at stake: in building a supervisory system for the financial sector at European level. As such, we will make Europe the first region in the world to benefit from such an integrated approach.
A further G20 commitment is to regulate alternative investment funds. Barnier believes Europe will have to work together, and quickly in order to find an agreement on this text and he is convinced that Europe has the means to put in place appropriate and effective rules.
2. Closing the regulatory loopholes so that no market, no territory and no institution escape supervision. This is essential so as to strengthen the robustness of the financial system.
Europe needs to promote the standardisation of derivatives and to develop central clearing parties for these products. These issues are essential if it wants financial stability.
Europe will also need to revise the MiFID Directive with the aim of strengthening transparency on financial markets, in particular, for alternative platforms.
And Barnier has said he will not avoid the difficult issues such as short-selling.
3. Establishing common rules at an international level which guarantee the solidity of the financial sector and do not worsen pro-cyclicality.
One of the strongest conclusions of the G20 was the shared commitment to reform together and to ensure convergence of accounting standards at international level. To this end, Europe needs to find the right balance between a faithful representation of a company’s financial situation and wider financial stability. This issue will be at the centre of discussions in the coming months.
4. Improving risk management and the internal control of financial institutions, including remuneration
On top of supervision and regulation by public authorities, Barnier says he is convinced that if we want to prevent future crises, financial institutions themselves, and other companies, need to change. We need stronger corporate governance.
5. Preventing and managing future crises
© European Commission
