Select Committee on European Union First Report


Changes to the regulation and supervision of financial markets, nationally and on a cross-border basis, have been proposed in response to the financial crisis. The European Commission has published three key proposals, updating capital requirements and deposit guarantee schemes and introducing rules on rating agencies. Sub-Committee A, under the Chairmanship of Baroness Cohen of Pimlico, has decided to commence an inquiry examining the role of European Union regulation in the financial sector, the effectiveness of these proposals and further responses at a European level.

The inquiry will seek to answer the following questions:

(1)  Current Commission Proposals: Will enforcing a prudential financial regime be an effective method of preventing a repeat of the financial turmoil? Will Commission proposals amending the Capital Requirements Directive and introducing rules on credit rating agencies prevent a future crisis? What dangers are presented by these amendments? Are changes needed to International Accounting Standards? How effective are current proposals to protect bank deposits?

(2)  Further Legislative Opportunities: How can we achieve a coherent set of rules on last resort assistance, deposit protection and bank insolvency proceedings? Should a revised directive on the reorganization and winding up of credit institutions include a system of prompt corrective action, with intervention triggers tied to a leverage or liquidity ratio? Do rules on state aid to the banking sector need to be clarified? What other rules are needed to ensure financial stability in Europe?

(3)  EU Supervisory Reform: Do we need a European System of Financial Supervisors or a central European authority to supervise pan-European financial institutions? What type of fiscal resources should such an authority have access to? How effective would group supervision be in creating a unified system of supervision across the single market? Would group supervision assert the primacy of large supervisors to the detriment of the supervising bodies of smaller Member States? Do we need a rethink of the home-host country divide with regard to supervision and crisis management in the EU?

(4)  Working Practices: Do EU institutions need to amend their working practices on financial services? How effective are current working practises in providing a rapid response to a crisis?

(5)  Global Supervisory Reform: Does the turmoil signal the need for a global supervisory system? If so, what role should the EU and existing financial institutions, such as the IMF, take in this system? Is a new Bretton Woods agreement necessary?

The aim of this inquiry is to provide an opinion on the effectiveness of the Commission responses, inform the debate surrounding these issues within EU institutions and examine possible opportunities for further reform. The inquiry does not intend to examine whether the United Kingdom should join the eurozone, nor the effectiveness of the national Government response to the crisis.

Guidance to those submitting written evidence

Written evidence is invited in response to the questions above, to arrive by no later than 9 February 2009.

The questions above cover a broad range of topics and there is no need for individual submissions to deal with all the issues. Evidence should be kept as short as possible: submissions of not more than four sides of A4 paper of free-standing text, excluding any supporting annexes, are preferred. Submissions longer than this should contain a summary. Paragraphs should be numbered.

Evidence should be sent in hard copy and electronically to the addresses below.

Evidence should be attributed and dated, with a note of the author's name and position. Please state whether evidence is submitted on an individual or corporate basis.

Evidence becomes the property of the Committee, and may be printed or circulated by the Committee at any stage. You may publicise or publish your evidence yourself, but in doing so you must indicate that it was prepared for the Committee.

Submissions will be acknowledged. Any inquiries should be addressed to Robert Whiteway, Clerk of Sub-Committee A, Committee Office, House of Lords, London SW1A 0PW; telephone 020 7219 3616; fax 020 7219 6715; e-mail

This is a public call for evidence. You are encouraged to bring it to the attention of other groups and individuals who may not have received a copy directly.

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