Tuesday, 29 September 2009
Jean-Claude Trichet , the president of the European Central Bank, emphasized the important role of macro-prudential supervision and the envisaged European Systemic Risk Board (ESRB) in his speech before the members of the European Parliament's Committee on Economic and Monetary Affairs on 28th September 2009.
He pointed out that the global financial crisis, which is not over yet, showed the importance of the financial governance and the EU needed a financial regulator body to efficiently struggle with any possible crisis. He also argued that “[c]oping with systemic risks will continue to be of the essence, especially in view of the increasing sophistication of global finance that, in turn, is facilitated by the rapid technological progress. Against this background, it is the right step to set up a body specifically responsible for macro-prudential oversight at the European level in the form of a European Systemic Risk Board.”
According to him, the envisaged European Systemic Risk Board (ESRB), which was proposed as a “European system for supervision of the financial industry” by the Commission on 23 September, is appropriate to implement this mission because “[i]n terms of output, the Board’s focus on the identification of risks and the provision of early warnings, where necessary, and of appropriate recommendations, is equally pertinent.” Additionally, he said that the principle of “comply or explain” will be applied, which means that the members will have to comply with the policies of the Board or they will have to explain their incoherent financial policies to the Board.
According the proposal (Article 3), “[t]he ESRB shall be responsible for the macro-prudential oversight of the financial system within the Community in order to prevent or mitigate systemic risks within the financial system” and the main tasks are; “identify and prioritise such risks; issue warnings where risks are deemed to be significant; and issue recommendations for remedial action where appropriate.”
The European Central Bank is responsible for the monetary policy covering the member states which use euro as the currency unit and Jean-Claude Trichet, French civil servant, is the president of the ECB since 2003.
By Yilmaz Kaplan (JTW)
