In a speech during the 2009 ECON meeting with national parliaments, Lorenzo Bini Smaghi, Member of the Executive Board of the ECB, offers some ideas for broadening the supervisory powers of the European central bank.
Mr. Bini Smagni thinks that “the EU regulatory and supervisory framework [of financial markets], which is based on a set of EU directives and some mechanisms for cooperation designed several years ago, does not seem to have worked as expected”.
The proposals are:
- No discretionary interpretation of EU directives in order to secure advantages for domestic institutions and markets – maybe by creating some kind of European supervisory rulebook;
- A single institution for macro and micro-prudential supervision;
- National and European authorities have to work in a more integrated way, both in respect of crisis prevention and resolution.
The speech hints of assigning new competences to the ESCB or to a body close to the ECB. According to Mr. Bini Smagni the macro-prudential supervisory tasks to be assigned to the ECB should include:
• the development of early warning systems about the emergence of risks and vulnerabilities in the financial system;
• the conduct of macro-stress testing exercises aiming at verifying the degree of resilience of the financial sector to specific shocks and propagation mechanisms with cross-border and cross-sector dimensions;
• the definition of reporting and disclosure requirements;
• macro-prudential regulation related to pro-cyclicality, leverage, risk concentration and liquidity mismatch.