E.U. overhaul works to avert crises

Stephen Beard Sep 23, 2009

E.U. overhaul works to avert crises

Stephen Beard Sep 23, 2009


Steve Chiotakis: Today China offered some support to a U.S. plan to build
a more balanced global economy. The proposal would shrink surpluses in big exporting countries such as China and boost savings in nations with big debt, such as the United States. This comes as world leaders get ready to meet in Pittsburgh tomorrow for the Group of 20 Nations conference.

Ahead of that, the E.U. today unveiled a plan to overhaul the way banks and financial markets are overseen.
Marketplace European Correspondent Stephen Beard is with us from London to talk about it. Good morning, Stephen.

Stephen Beard: Good morning, Steve!

Chiotakis: So what’s all this in a nut shell?

Beard: Well, this really is designed to remedy what was seen as the major problem in Europe which aggravated the credit crunch and the financial crisis — that is, a lack of coordination between the regulators and the institutions within each of the 27 member states. So what this draft plan today proposes is a series of Europe-wide bodies to monitor and reduce financial risk. I mean there is, for example, a risk board, which will try to spot problems like the credit crunch before they actually blow up into a crisis and try and head them off. And also there’ll be regulatory bodies looking Europe-wide at the banks, the insurers and the financial exchanges.

Chiotakis: Now Stephen, this is proving quite controversial, especially in Britain. Why?

Beard: Well Britain has always jealously guarded its financial center. It is the biggest in Europe and the most profitable, it’s always very suspicious of moves from continental Europe to control its financial center. And these bodies are going to have Europe-wide powers. I mean, a European regulator is going to be able to tell a national regulator the action he should take. So the Brits are likely, for example, to insist that some of these boards have a very strong British representation on them. For example, the deputy chairmanship, say, of the risk board might be given to the governor of the Bank of England, Mervyn King.

Chiotakis: So this obviously isn’t a done deal. I mean what happens next, Stephen?

Beard: Well, it has to be agreed by all 27 governments and also by the European Parliament. But the European Commission says this is a bold idea and important blueprint and it is taking it to the G20 meeting in Pittsburgh to present to other world leaders as a global blueprint — a model for what might be established globally to prevent financial crises from developing in the future.

Chiotakis: Marketplace’s European correspondent, Stephen Beard. Stephen, thanks.

Beard: OK, Steve.

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