European, US economists discuss economy reform packages

European and American economists got together to discuss their respective economy reform packages, with more meetings expected to be held on a regular basis.

The European Parliament's Economic and Monetary Affairs Committee, which has Maltese Labour MEP Edward Scicluna as its vice chairman, met with the US Senate's Banking Committee.

Prof. Scicluna told the meeting there were similarities in the proposals expected to be made by the European Parliament and the Obama Reform Package.

The European Commission is expected to propose a financial supervision package at the end of September. This will consist of two elements, with a European Systematic Risk Board intended to monitor and assess risks to the stability of the financial system as a whole and provide early warning of systematic risks that could be building up and make recommendations on actions needed to deal with such risks.

The Commission is also expected to propose a European System of Financial Supervisors that would foster harmonised rules and coherent supervisory practice and enforcement. The system would consist of a network of national financial supervisors working in tandem with the new European supervisory authorities.

The American side is proposing a Financial Services Oversight Council made up of heads of each of the main financial regulatory agencies, whose aim would be to take a system-wide perspective and report emerging risks to Congress on an annual basis.

The US has also proposed stricter regulation of the most interconnected financial institutions and critical systems by the Federal Reserve, strengthening the capital and liquidity requirements by bringing previously excluded trading activities under the regulatory umbrella and reducing the reliance on credit rating agencies. It is also proposing the setting up of a Consumer Financial Protection Agency to eliminate fierce competition between financial institutions and regulators that could be harmful to the consumer. It feels consumer protection should not be separate from enforcement and the supervision of financial services.