According to a BBC article on 2 September 2010, European Union (EU) officials have said that agreement has been reached on reforms to financial supervision. The article indicates that EU member States and the European Commission have “agreed to create agencies that from next year are to oversee banks, insurers, and financial markets”.
Although the agreement must still be approved by European Finance Ministers and the European Parliament, it is a positive step forward in avoiding a repetition of the financial crisis that brought the global economy to its knees and in which loose supervision of companies was blamed for contributing to the problems. If it is approved, then this will follow on from the major Wall Street reforms in the USA that President Barack Obama signed into law in July 2010.
As well as creating political consensus on the creation of a European financial supervisory framework, the agreement also “creates a European Systemic Risk Board with the task to look out for threats to Europe’s economy from the financial sector”. If the agreement is ratified, the EU hopes to launch the new agencies in January 2011. The agreement is the result of a compromise between efforts to ensure strong protection from cross-border crises, while protecting the sovereignty of EU member States.
“While we are still a long way from any global agreement on an International Financial Transaction Tax, which we in Global March view as a crucial element in any global financial supervisory system, this agreement is nevertheless an important indication that the US and EU governments acknowledge the need to reign in the reckless and irresponsible behaviour of the financial sector,” said Global March Chairperson Kailash Satyarthi.
He pointed out that: “Millions have suffered as a direct consequence as donor governments have implemented severe austerity measures, slashing public spending and cutting back on vital humanitarian and development aid. Those companies involved must be made to realise the consequence of their actions as, in all likelihood, gains made in achieving the Millennium Development Goals and the elimination of child labour will be at best kept at the same level in the coming years, and at worst rolled back. Avoiding this worst case scenario is why an International Financial Transaction Tax should underpin reforms to the international financial supervisory system.”
Source: BBC News