To address these problems the European Commission last fall initiated a fundamental overhaul of the EU supervisory structure. A group chaired by the former head of the IMF, Mr. Jaques de Larosière, was mandated to come up with proposals for needed reform. The recommendations made by the group were broadly embraced by the EU member states and we are now at that stage in the process where final details are being negotiated. The new supervisory structure will rest on two pillars. The first pillar – micro prudential supervision The first pillar consists of several initiatives to strengthen micro prudential supervision in the EU. Regulatory measures at the EU level shall ensure strengthened and more consistent  BIS Review 134/2009  1  supervisory powers at the national level. Supervisory colleges will be mandatory for all the major cross-border firms in the EU. Differences in national laws will be indentified and removed. All these reforms will take place within the new European supervisory network, the European System of Financial Supervisors (ESFS). The main element of this reform is the transformation of the three existing EU supervisory committees into independent EU authorities. These authorities will form a central hub of the European supervisory community and will be equipped with both regulatory and supervisory powers. The day-to-day supervision will still be a national responsibility and carried out on a decentralised basis. The new authorities are therefore primarily to be seen as a complement to the national regulators and supervisors and not as a replacement.
In particular, downside risks to the achievement of our employment and inflation goals amid very low interest rates were compelling arguments for a relatively cautious and predictable approach to policy. This proved its worth: The U.S. economy continued to expand at a healthy pace even as the Fed raised rates numerous times. For those who follow the Fed closely, you’ve noticed that the FOMC has been slimming down its statements of late and using less forward guidance about the future path of policy. In this vein, the FOMC in its recent statement removed language indicating that monetary policy remains accommodative.3 Let me make clear, these more concise statements do not signify a shift in our monetary policy approach. Instead, they represent the natural evolution of the language describing the factors influencing our policy decisions in the context of the strength of the economic outlook and inflation being near our 2 percent longer-run goal. These changes in our communication of policy views are a sign that we are nearing the end of the process of normalizing monetary policy and are inching closer to conducting normal monetary policy. Arguably, it’s been a long time since monetary policy was normal, so it’s worth describing what “normal” looks like in some detail. At its most basic level, monetary policy-making will remain the same: The path of interest rates will continue to be guided strategically by our dual mandate objectives and shaped tactically by the data and their implications for the economic outlook.