EU to tighten screw on cross-border banking
RENATA GOLDIROVA
16.10.2008 @ 00:58 CET
EUOBSERVER / BRUSSELS - All 27 EU leaders have thrown their weight behind the multi-billion rescue strategy agreed by the 15-strong eurozone last Sunday, while eyeing a set of measures likely to tighten the screw over how the financial sector operates in future.
"The European Union now has a massive united response to this crisis without precedent," French President Nicolas Sarkozy said after the first day of the top-level meeting ended late Wednesday (15 October).
The EU leaders backed the eurozone plan, but details on new bank regulation proved divisive (Photo: The Council of the European Union)
The rescue plan allows for injecting liquidity, government guarantees of inter-bank lending as well as recapitalisation of distressed banks.
On top of the plan, EU leaders unanimously backed the idea of setting up a new "crisis management unit" in the "coming days" - something that Mr Sarkozy described as a "light-weight structure" designed to exchange information, give advice and co-ordinate action between member states.
Split over supervisory arrangements
But Mr Sarkozy himself admitted that EU delegations have yet to find common ground on principles on how to supervise cross-border financial institutions, which operate in several EU states.
"There were divergences," the French leader said, referring to an idea to strengthen supervision by bringing together national supervisors from all the EU states involved with surveilling any multinational banking chain.
While all agreed on the need for better co-ordination between national supervisors, some EU capitals - especially small countries where markets are dominated by subsidiaries of major foreign banks - feared that the balance of power would tip toward regulation from the "mother" bank's home state.
"The present situation is a good test of the arrangements, and we believe the present set-up with subsidiary-level supervisors having the above powers played a role in the fact that our financial market stayed insulated from global events," one diplomat from a small EU state explained.
Mr Sarkozy said his team would work tonight to draft an acceptable compromise so that "no institution is an exception to supervision." "We don't want the same causes to result in the same effects in the future," he underlined.
World summit on financial crisis
The EU is also calling for a global summit on the financial crisis, with Mr Sarkozy and European Commission chief Jose Manuel Barroso to present the idea to US President George W. Bush when they visit him at Camp David on Saturday (18 October).
"The global response is essential," Mr Barroso said, suggesting that the EU, the US as well as emerging economies need to introduce "new financial governance" into the system and that the summit be a "G8 plus, or a G13 - some have even suggested a G20".
The world summit should "preferably" be organised in November.