EU Parliament OKs new EU financial supervision in hopes of avoiding future economic crises

EU Parliament OKs financial supervision law

BRUSSELS — The European Union Parliament has approved new financial oversight institutions aimed at preventing another financial crisis like the one that led to massive bank bailouts at taxpayer expense.

The parliament overwhelmingly backed the plan to set up watchdog boards for the financial markets, banking and insurance sectors in addition to a European board to make sure the EU can avoid new crises.

The institutions should become active at the beginning of next year.

Parliamentary approval in Strasbourg, France, was the last hurdle for the plans, which were hailed as a major step forward in EU-wide financial management. The EU member states had already approved them earlier this month.

“This is a historic watershed,” said Finance Minister Didier Reynders of Belgium, which currently holds the EU presidency.

Key in the setup is the Frankfurt-based European Systemic Risk Board which will have to make sure the EU as a whole will be much better prepared to contain any financial crisis. It comes after near financial collapse in Greece last spring threatened the stability of the euro currency itself.

Financial Services Commissioner Michel Barnier said that the measures should “allow to avoid a recurrence of severe crises, protect consumers who are also taxpayers and feed sustainable economic growth.”

“We should not forget that we mobilized 17 percent of our gross domestic product to save the financial sector. Banks have to pay for banks,” Barnier added.

Britain has said that the plans will continue to yield enough independence to companies in the City of London — the British capital’s financial district — and to the government for controlling and setting its budget.

“There was no other solution than more Europe, as financial supervision could no longer stay in the hands of national watchdogs whose authority ends at their national borders,” said legislator Jose Manuel Garcia-Margallo of the EPP party, the biggest in parliament.

The EU plan reflects moves in the United States, where a council of regulators led by Treasury Secretary Tim Geithner is to monitor threats to the financial system. The U.S. has also created a new consumer financial protection bureau within the Federal Reserve to write and enforce new regulations covering lending and credit.

Garcia-Margallo said that the supervisory boards will be able to settle dispute between member states and impose temporary bans on certain risky activities.