The European Commission yesterday launched a set of new proposals aimed at reinforcing the stability of the financial system in the European Union, particularly in its banking and insurance sectors.
Although the Commission's proposals are considered to be a direct response to the current turmoil in the financial markets, the new rules will not make a difference in the short term to resolve the current crises, as the proposals will still need to get the green light from member states and the European Parliament, a process which might take up to two years.
Brussels yesterday proposed that banks in the EU will be restricted in lending beyond a certain limit to any one party, while national supervisory authorities will have a better overview of the activities of cross-border banking groups.
Announcing these measures during a press conference in Brussels, Internal Market Commissioner Charlie McCreevy said that these new rules will fundamentally strengthen the regulatory framework for EU banks and the financial system.
"I believe that they are a sensible and proportionate response to the financial turmoil we are experiencing. Basic rigour, transparency and prudence are key to a healthy and stable banking system," he said.
The new rules are being proposed as amendments to the Capital Requirements Directives which aim to ensure the financial soundness of banks and investment firms.
These directives stipulate how much of their own financial resources banks and investment firms must have in order to cover their risks and protect their depositors.
Among these changes proposed, the Commission is insisting that banks will be restricted in lending beyond a certain limit to any one party while supervision of cross-border banking groups will be improved through the establishment of 'colleges of supervisors' for banking groups that operate in multiple EU countries.
At the same time, the rights and responsibilities of the respective national supervisory authorities will be made clearer and their cooperation will become more effective.
The Commission's proposals also include the need to improve the quality of banks' capital with clearer EU-wide criteria for assessing whether "hybrid" capital, including both equity and debt, is eligible to be counted as part of a bank's overall capital - the amount of which determines how much the bank can lend.
Mr McCreevy's proposals also include various measures to improve liquidity risk management particularly for banking groups that operate in multiple EU countries and the tightening of rules to improving risk management for securitised products.
According to the Commission, the proposed amendments are, in the main, a direct follow-up to the roadmap for the current financial turmoil agreed by EU finance ministers a few weeks ago.
Although the Commission's proposals are considered to be a direct response to the current turmoil in the financial markets, the new rules will not make a difference in the short term to resolve the current crises, as the proposals will still need to get the green light from member states and the European Parliament, a process which might take up to two years.
Brussels yesterday proposed that banks in the EU will be restricted in lending beyond a certain limit to any one party, while national supervisory authorities will have a better overview of the activities of cross-border banking groups.
Announcing these measures during a press conference in Brussels, Internal Market Commissioner Charlie McCreevy said that these new rules will fundamentally strengthen the regulatory framework for EU banks and the financial system.
"I believe that they are a sensible and proportionate response to the financial turmoil we are experiencing. Basic rigour, transparency and prudence are key to a healthy and stable banking system," he said.
The new rules are being proposed as amendments to the Capital Requirements Directives which aim to ensure the financial soundness of banks and investment firms.
These directives stipulate how much of their own financial resources banks and investment firms must have in order to cover their risks and protect their depositors.
Among these changes proposed, the Commission is insisting that banks will be restricted in lending beyond a certain limit to any one party while supervision of cross-border banking groups will be improved through the establishment of 'colleges of supervisors' for banking groups that operate in multiple EU countries.
At the same time, the rights and responsibilities of the respective national supervisory authorities will be made clearer and their cooperation will become more effective.
The Commission's proposals also include the need to improve the quality of banks' capital with clearer EU-wide criteria for assessing whether "hybrid" capital, including both equity and debt, is eligible to be counted as part of a bank's overall capital - the amount of which determines how much the bank can lend.
Mr McCreevy's proposals also include various measures to improve liquidity risk management particularly for banking groups that operate in multiple EU countries and the tightening of rules to improving risk management for securitised products.
According to the Commission, the proposed amendments are, in the main, a direct follow-up to the roadmap for the current financial turmoil agreed by EU finance ministers a few weeks ago.