However, the macro-prudential regime must find a balance between preserving national flexibility – as the business cycle varies between European countries – and maintaining a level playing field so as not to distort competition within the Single Market. As I mentioned, aside from the institutional arrangements, many challenges remain to be resolved.
The G-20 and the European Commission have taken some initiatives in addressing the regulatory deficiencies highlighted by the crisis. These include Basel III, OTC derivatives, the shadow banking system, high frequency trading, central counterparties (CCPs) and crisis resolution mechanisms, etc... Such proposals remain at an early stage and still face the challenges of jurisdictional realities.