Resolution funds ‘would encourage irresponsible behaviour'

FINANCIAL SUPERVISION

Finance ministers gave their endorsement to an overhaul of financial supervision in the EU. Their approval paves the way for a final agreement when the European Parliament votes on the plans on 22 September.
The reforms include the creation of three supervisory authorities with binding powers over the EU financial sector, and the creation of a European Systemic Risk Board (ESRB) to monitor threats to the EU economy as a whole. The three authorities and the ESRB are expected to start work on 1 January.

The endorsement followed a provisional agreement reached last week (2 September) between MEPs and Belgium, which holds the rotating presidency of the EU's Council of Ministers and represented the member states. Finance ministers approved the deal and did not seek to change any of the details. The deal struck between the Belgian presidency and MEPs will grant greater power to the authorities than governments envisaged when ministers agreed their common position in December last year. The authorities will be able to settle disputes between national supervisors, and give direct orders to supervisors in a crisis situation. In cases where national supervisors are flagrantly in violation of EU law, the authorities will be able to give direct instructions to financial institutions.

Member states also conceded to the Parliament that the president of the European Central Bank would chair the ESRB at least for the first five years of its existence, and that governments' ability to challenge decisions taken by the authorities will be curtailed through an anti-abuse clause.