2  BIS Review 134/2009  In terms of composition the ESRB’s decision-making body will consist of the governors of all the EU central banks, including the President of the ECB, as well as representatives from the European Commission and the three new EU supervisory authorities. National supervisors will be represented in the ESRB, but not have any voting powers. Taken together these pillars imply quite substantial changes in the EU supervisory structure. And even if there is broad agreement among member states on the overall concept, some parts remain highly controversial. The issue of handing over power to the EU supervisory authorities is particularly sensitive. Some member states argue that this cannot be done unless guarantees are in place that it will not impinge on national fiscal responsibilities. Hopefully, the Swedish Presidency will be able to sort out these issues and make its ambitious implementation plan a reality. If so, an agreement will be reached by the end of this year and the new supervisory structure will be up and running already during the course of next year. Supervisory reforms need to be complemented by robust and harmonised frameworks for crisis management and resolution After going through this list of reforms you may ask to what extent they will actually work in practice to promote and maintain financial stability within the EU? A number of questions can be raised, of course, but overall I would say that it looks very promising.
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.