Initially, these employees could of course be recruited from the existing national supervisors. Also the staff of the EOFS would have to cooperate with the national supervisors. I also want to stress that the EOFS should be an independent agency. This independence is important to achieve a division of labor and power. It should not be part of the European Commission and not of the ECB. One possible solution is therefore that EOFS is established directly by the EU countries and with an obligation to report to the European Parliament. My proposal is therefore quite different from the existing CEBS-structure which is part of the Lamfalussy regulatory framework in the EU. Although some of the EOFS’s tasks would overlap with those of CEBS, the focus is different. CEBS’s main tasks are to advice the EU-Commission, to enhance supervisory co-operation and to contribute to convergence of Member States' supervisory practices. CEBS is therefore a regulator and not a supervisory agency. The EOFS would be much more of a supervisor with as main task to produce coherent assessments of the risks and vulnerabilities of cross-border banking groups. In my view and to start out with, the EOFS need not have formal powers, with the exception that it should have the right to require cross-border banks to submit information. Formal supervision could still rest with the national supervisors according to the existing home-host arrangements and potential sanctions be decided by the national supervisors. In this respect, the EOFS should be limited to suggesting actions to the national supervisors.
In addition, the home country will get an explicit EU-mandate to take the interest of the other relevant countries into account in its assessments and decisions but it is not clear how this will work in practice. There is also an accountability problem with this solution. National authorities are both appointed by and accountable to the national governments and in extension to the national electorate. It may be difficult for a host country to hold the authorities in a home country responsible for a specific decision, even if its main effect is in the host country. A fourth possibility is the pan-European solution where both the mandate and responsibility for supervision are transferred from the national level to the EU-level. This would imply the creation of a European FSA, as well as granting the ECB a role as Lender of Last Resort for cross-border banks. This solution raises a number of difficult political considerations. It basically means handing over a part of the sovereignty to the EU-level. Also, at present the EU has no supra-national taxing power, so some other formula on burden sharing would have to be found. Presumably the political obstacles for this solution are large. At least in the short run, this fourth solution is not realistic. Another approach With this background, I draw three conclusions. First, the present situation with a growth of crossborder banks – with some clear examples in the European region – combined with national responsibility for supervision and financial stability is not satisfactory.