European new regulatory architecture
This comment piece highlights the new architecture of financial supervision for the European Union (EU)
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Need for new supervisory framework
The recent global financial crisis showed the limits of financial surveillance. The earlier framework was restricted to an advisory approach towards supervision where the Committee (CEBS, CEIOPS and CESR) could only issue non binding guidelines and recommendations.
Thus to strengthen financial supervision by empowering regulatory bodies to issue and enforce rules and guidelines, the European Commission brought forward proposals to replace the existing architecture with the European System of Financial supervision (ESFS).
Along with enforcement powers the new supervisory structure aims to create a strong network among national supervisors and provide macro prudential oversight thereby maintaining financial stability in Europe.
With confirmation from the Economic and Financial affairs (ECOFIN) council and the European Parliament and after agreement by all member States, on January 2011, the ESFS was officially established. It consists of three European Supervisory Authorities (ESAs) and the European Systemic Risk Board (ESRB).
