Corporate & Securities Law

By Jim Hamilton

Senior UK Treasury Official Endorses Pan-European Financial Regulator

Keying on the financial regulatory reforms recommended by the EU High Level Group, UK Chancellor of the Exchequer Alistair Darling urged the creation of an independent single European financial regulator to conduct rulemaking and also iron out national divergences. In a letter to the European Union, he also set forth core principles to guide the reform of financial regulation. The letter was also sent to Charlie McCreevy, EU Commissioner for the Internal Market.

The single regulator he envisions would become the source of technical rules, rather than national authorities or the Commission. It would also be a forum through which regulators would increase dialogue and cooperation. The new authority would interact with the Financial Stability Forum and regulators around the world, as well as the global standard setters. In time, the official envisions the new entity becoming a regulatory authority and a forum in which the effectiveness of national regulators can be peer reviewed. But, it would not supervise individual banks or investment firms. That would be left to national authorities.

One principle of financial regulation is that prudential and conduct of business issues cannot be separated. He noted that problems in the US mortgage-backed securities market demonstrate that conduct of business regulation can be as critical for financial stability as prudential regulation. Moreover, conduct of business failings within a firm can lead to its own prudential failure. He thus views it as essential that national and international arrangements support collaboration on prudential and conduct issues.

Another principle is that the responsibility for managing the resolution of financial crises must be an essential part of designing regulatory structures. Still another principle is that EU financial regulation reform must be coordinated globally with the EU?s counterparts and global institutions such as the Financial Stability Forum.

Full post as published by Jim Hamilton's World of Securities Regulation on March 04, 2009 (boomark / email).