The Committee's Opinion on proposals for European financial supervision - Treasury Contents

Examination of Witnesses (Questions 55-59)



  Q55 Chairman: Welcome to the Committee and its second evidence session. Can you introduce yourselves for the shorthand writer, starting with André?

  Mr Villeneuve: I am André Villeneuve. I am Chairman of the City of London's EU Advisory Group, which has about 26 or 27 members from different firms practising in the City and we have as observers senior officials from the Treasury, the FSA and the Bank of England.

  Ms Ridpath: Barbara Ridpath. I am Chief Executive of the International Centre for Financial Regulation, a recently established research institute with public and private stakeholders.

  Mr Popham: Stuart Popham, Senior Partner of Clifford Chance and Chairman of the shortly to be launched City UK, a body to promote financial services throughout the UK.

  Mr Gleeson: Simon Gleeson, Financial Regulatory Partner from Clifford Chance.

  Q56  Chairman: Welcome to this session. We have 45 minutes for this session, finishing about 11.35, so we have a lot to go through. The Commission says "deeper and more integrated financial markets offer better opportunities for financing and risk diversification, and thus help to improve the capacity of the economies to absorb shocks. Financial integration and stability are therefore mutually reinforcing." Do you agree?

  Ms Ridpath: Sadly, I think there is a false premise there. Financial integration and financial stability are sadly not mutually reinforcing. They are important. Financial integration and capital flows are critical but unfortunately financial integration permits more rapid transmission of crisis and contagion, not less, and what you need is effective circuit breakers to contain that contagion.

  Q57  Chairman: How will the new system of a Systemic Risk Board and European Supervisory Authorities affect EU competitiveness? Is there going to be a trade-off between its effectiveness and national independence?

  Mr Villeneuve: I think there is good and bad here. It should be helpful if it puts us on a level playing field with a single rule book and single application of these rules. It will not be good if the EU forges ahead of international standard setters such as the FSB or the Basel Committee on Banking Supervision.

  Q58  Chairman: Are there some countries that are going to win out of this and some that are going to lose, potentially?

  Mr Popham: Unfortunately, the answer has to be that it all depends on how it works in practice. The potential certainly exists for that. If it achieves a uniformly enhanced supervisory regime over financial systems throughout the EU that can only be good for everybody, but it depends on how it is achieved and by whom and therein lies the difficulty of this. Because of its lack of specificity and preciseness it is something of—I was going to say "a lottery" but I think it is just unknown. Let us call it that.

  Q59  Chairman: If these proposals had been implemented would the financial crisis have been better dealt with?

  Ms Ridpath: Possibly at the margin, because you would have had someone blowing the whistle a little sooner, but it would not have made a substantial difference.

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Prepared 16 November 2009