Last week the European Union finance ministers decided that co-operation in financial regulation and supervision should be strengthened. They will look at the issue again in April. Indeed, time is running out to show that the evolution towards full co-operation can meet the challenge of Europe’s financial integration and that the revolution of creating a single supervisory authority is therefore not necessary.
The recent financial turmoil has confirmed the shortcomings of the current system. In the monetary field, the European Central Bank acted quickly and decisively, getting high marks even from those who had long questioned its ability to manage a crisis. The European supervisory function, on the contrary, has been almost absent. Even with signs of a clear risk of contagion, no common analysis of the situation, no sharing of confidential information, no co-ordinated communication and no emergency meetings appear to have taken place among EU supervisors. Even the ECB, unlike the Federal Reserve, lacked the information on the soundness of counterparties normally available to national central banks.
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