Politics

EU expands financial oversight

EU finance ministers agreed in early December to establish new control authorities for banks, insurers and stock exchanges. In 2010 and 2011 the European Banking Authority (EBA) in London, the European Insurance and Old-Age Pension Authority (Eiopa) in Frankfurt and the European Securities Authority (ESA) in Paris are to be set up. For the first time, the new oversight bodies will be given the power to implement internal-market regulations and check on national control authorities in relation to regulation of border-crossing financial companies. The EU authority could intervene if, for instance, national authorities failed to act in the event of too-small capital reserves or deposit insurance in the institutions. However, the new authorities cannot compel EU countries to utilize tax money. However, the right of intervention is being weakened: national governments can, in the event of a crisis, overturn decisions of the EU authority by a simple majority. They are also to be allowed a second round of voting.

Bank aid to resolve credit squeeze

The credit squeeze has led to a critical situation, says Financial Times Deutschland (FTD), quoting federal chancellor Angela Merkel. In order for the flagging credit provision by banks not to put a brake on the slow upswing, the government is, according to the FTD, planning a new bank aid package. In addition to the 115 billion euros already made available through the Germany Fund, a further 10 billion euros are now to be made available in order to guarantee that loans to firms are serviced and can be paid back. This should stimulate credit provision by the banks.

International banking oversight to regulate more tightly

The Basel Committee, to which central bankers and supervisors of 27 industrial and threshold countries belong, wants to regulate credit institutions more tightly. In February, the banks are to receive questionnaires, and by April supply the overseers with raw data on how many treasury bonds or Pfandbriefe they hold, and which ones. The committee will then test a variety of scenarios. Germany is advocating equal treatment of all legal forms of credit institutions, and is against the already adopted indebtedness limit which is to be introduced by the end of 2010. It has also been announced that in good times banks should build up capital buffers. The overseers can issue a ban on dividends in the event of non-compliance. Definitive rules are to be produced by the end of 2010. By 2012 they should then enter into force.