Monday, 6 September 2010

New measures aiming at enhance financial consumer protection in Europe through prudential regulation

EU negotiators reached agreement on a package of measures to beef up supervision of the bloc's banks, giving new EU watchdogs a mandate to overrule national authorities and ban risky financial products that were widely blamed for the world's worst recession in decades.

Negotiators from the EU's three institutions - the EU Council of Ministers, the European Parliament and the European Commission - reached a political consensus on the package. A European Systemic Risk Board (ESRB) and three new European Supervisory Authorities - a European Banking Authority (EBA), a European Insurance and Occupational Pensions Authority (EIOPA) and a European Securities and Markets Authority (ESMA) - will form part of the new architecture of financial supervision agreed on September 2. The trio of new financial watchdogs will be complemented by a group attached to the European Central Bank that will keep watch for other economic risks, like a property price bubble.

In the European debate, where regulation is aimed at protecting the consumer a distinction can be made between prudential regulation(based upon the idea of information asymmetry and concerned with soundness, solvency, safety and of banks and may apply even if there is not systemic risk) and conduct of business regulation(that focuses on how banks conduct business and self regulation with their customers) which also raise questions related to the legal status and binding character of this codes.

Definitely, this new supervisory architecture is a step forward to protect consumers against toxic financial products. More information is available on

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