The newly-formed European Systemic Risk Board will meet for the first time on the 20th of January,
with the aim of preventing a recurrence of the financial mistakes that have shaken the global
economy in recent years.
Under a European Commission proposal finalised last November, the three existing European
financial services advisory committees (individually responsible for banking, insurance and pensions,
and securities) are replaced this month with the new European Systemic Risk Board (ESRB) and three
European Supervisory Authorities.
The ESRB will be responsible for the ‘macro-prudential oversight’ of the financial system in the
European Union – meaning that they’ll oversee the larger-scale national and international stability of
the member countries’ central banks and individual financial institutions.
The move coincides with UK Chancellor George Osborne’s restructuring of the UK’s financial
regulators. This year will see the existing Financial Services Authority (FSA) largely absorbed into
the Bank of England, its key responsibilities split between a new Consumer Protection and Markets
Authority and a Prudential Regulatory Authority, which will fulfil a similar role to the ESRB.
The coalition government has argued that the failures that led to the financial crisis in the UK were
partly due to the ‘tripartite’ nature of the previous Labour government’s banking regulation – with
regulatory authority split between the FSA, the Bank of England and the Treasury. In Osborne’s own
words, “No one was controlling levels of debt, and when the crunch came no one knew who was in
charge.”
With the new UK authorities monitoring the financial stability of UK banks and the wider economy,
and Europe-wide oversight by the ESRB, it’s hoped that there can be no repeat of the catastrophic
financial crash that the UK public are still feeling the effects of today.
