A leading shareholder group has called for an inquiry into whether the European Union should create a single financial watchdog, saying that the credit crunch has caused a “failure of trust” between the EU’s national regulators.
The Association of British Insurers (ABI) made the call when it launched a plan to help restore confidence and trust in European financial services. The body speaks for 90 percent of the U.K insurance market and about a fifth of the EU’s; its members own around 15 percent of the companies on the London Stock Exchange.
Replacing 27 national regulators with a single, pan-EU watchdog “is not a decision to be taken lightly” and would need detailed planning, the ABI said. “But the failure of trust between national regulators makes this the right time to start the exploratory work.”
The ABI listed several key points in the current financial crisis where regulators had acted in “a narrow view of national interest,” rather than looking at what was best for Europe as a whole. These included the collapse of Lehman Brothers and Fortis—the Benelux bank—efforts to restrict short selling, and depositor protection.
The financial crisis had “inflicted serious damage on the institutional framework that governs the regulation of financial services at the EU level,” the ABI said, adding that acting in the national self-interest meant, “The relationships essential to the smooth working of the supervisory institutions have weakened.”
Stephen Haddrill, the ABI’s Director General, commented: “Confidence and trust must be regained. We must now look carefully at both radical and evolutionary ways forward.”
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