Britannia Radio

12/05/2010

The recent financial crisis and the need for financial support

 to the
Greek economy have underlined vividly the interdependence of the EU's
economies, in particular inside the euro area. 

Urgent action has been
taken to deal with the immediate needs of the crisis but far-reaching
lessons should be drawn from it to strengthen the EU's system of
economic governance for the future. Consistent with its intentions at
the beginning of its term, the Commission is releasing today a
Communication aimed to reinforce decisively economic policy
coordination.
Update on economic coordination 2010. May
http://ec.europa.eu/economy_finance/articles/euro/documents/2010-05-12-com%282010%29250_final.pdf

Press release
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/10/561


Supplementary letter from Lord Myners, Financial Services Secretary,
HM Treasury
FOLLOW UP TO EVIDENCE SESSION HELD ON WED 29 APRIL 2009

  It was good to have the opportunity to appear in front of your
Committee again on 29 April. As I promised during the meeting, I am
writing to provide answers to the questions we did not manage to cover
fully during the evidence session due to lack of time, on the subject
of the ECB.
  Before I turn to the particular questions, it is worth noting that
Larosiere does not propose to put supervision in the ECB. The report
proposes an extended role for the ECB in macro prudential oversight,
in the form of a macro-prudential early warning body under the
auspices of the ECB and chaired by the ECB President. The report does
not however propose any role for the ECB at the micro supervision
level.
  In response to your particular questions:
Could the European Central Bank undertake a supervisory role, given
the possibility provided by Article 105.6 of the EC Treaty?
  While there is a clear need to improve supervisory cooperation, for
example through the use of supervisory colleges, I do not agree that a
European body should have supervisory powers over firms. A key concern
here for me is that national governments remain responsible for crisis
management, and that only national governments can, for example,
provide fiscal support to individual institutions. I note that the
Larosiere report did not propose the ECB have this role.
  You will remember from my evidence session that I do however believe
that there is a role for a EU macro-prudential early warning body, to
provide analysis of cross-border risks to our economies. That is why
the Chancellor proposed such a body in his 3 March letter. Such a body
would complement the early warning work of the IMF and FSB.
  This body will need to be sufficiently independent of the current EU
institutions to provide effective analysis. Clearly the ECB will need
to play a significant role in this body, as will the Bank of England
and the FSA.
  Regarding the specific Treaty legal base, we will have to wait and
see under what legal basis a proposal is made. I understand the
article suggested, which requires unanimity in the Council, is one
that might possibly be used to establish a macro-prudential early
warning body, but that there are good arguments in favour of using
Article 308 instead. Article 308 also requires unanimity.
If the ECB takes a role in supervision through its General Council
rather than the Governing Council, will this prevent the UK from being
disadvantaged by it not being a member of the eurozone?
  As in the previous question, I would not support an ECB role in EU
supervision. In terms of the macro-surveillance body, as I also
mentioned above, effective macro-surveillance requires any new body to
be independent and to include the most appropriate people in it
putting together its analysis. While the General Council includes
non-eurozone central banks, which is important, the new
macro-surveillance body will also benefit from input from national
supervisors, particularly from the main financial centres. Therefore
the policy response should be wider than that just a debate between
the General Council and the Governing Council.
Should the ECB play a role as an arbitrator between national
supervisory authorities on supervision of cross-border banks?
  I do not believe that the ECB should have powers over national
supervisors or over individual firms. I note that Larosiere's report
did not recommend a role for the ECB in arbitrating between
supervisors. You will remember from my evidence session that I also do
not believe that the Level 3 committees can become supervisors
themselves. Similarly therefore I do not consider that binding
mediation powers over individual firms are appropriate, nor
supervisory decisions over firms or infrastructure.

  I hope that these thoughts are helpful and thank you again for the
opportunity to clarify the Government's position on these issues.
11 May 2009
The whole debate (long-but easy to pick out important parts on)

http://www.publications.parliament.uk/pa/ld200809/ldselect/ldeucom/106/10602.htm
2009

************************************************************
Brussels, 29.10.2008
COM(2008) 706 final
COMMUNICATION FROM THE COMMISSION
From financial crisis to recovery: A European framework for action
http://ec.europa.eu/employment_social/esf/docs/from_crisis_to_recovery_en.pdf

There are lots more and will send if required. Anne