Future of European Financial Supervision, Towards a European System of Financial Supervisors

• Main Author: Arons, T.M.C.
• Format: Article in Journal/Newspaper
• Language: English
• Published: 2010
• Subjects: Iceland
• Online Access: https://dspace.library.uu.nl/handle/1874/356202

The 2008 financial crisis made clear the shortcomings in the European structure of financial supervision. In the cur­rent system of financial supervision the financial supervi­sor of the home Member State is in principle the only autho­rity entitled to supervise financial institutions even in case the institution operates across borders. If the home financial supervisor does not effectively supervise the financial insti­tution, this failure could affect clients and creditors in other Member States. The bankruptcy of Icelandic banks was felt by accountholders in the United Kingdom and the Nether­lands. The shortcomings in the Icelandic Deposit Guaran­tee scheme1 threatened to expose these depositors to losses on their savings that should have been covered by that sche­me. In the end, the UK and the Dutch government guaran­teed these deposits under the applicable deposit-guarantee scheme. However, the problems arising in the execution of the agreement concluded between the UK, Dutch and Icel­andic government to recover the UK and Dutch taxpayers’ money from Iceland show the enormous consequences of failure in local supervision. Despite their significant relevan­ce in the current crisis, in this article I will not address these problems in micro-prudential supervision of banks. This ar­ticle focuses on the mechanism to ensure consistent applica­tion by the different national supervisors of the harmonised set of conduct of business rules, in particular, the rules laid down in the Prospectus Directive 20032 and the Transparen­cy Directive 2004.3 In order to solve the shortcomings in the European struc­ture of financial supervision, the European Commission pro­posed to create a European System of Financial Supervisors (ESFS) consisting of national supervisors and three new su­pranational European Supervisory Authorities. A Superviso­ry Authority for the banking sector4, one for the insurance and pensions sector5 and a supranational European Supervi­sory Authority to ensure compliance by financial institutions with ...