EUROPEAN UNION: European Commission to enhance financial stability

Friday May 16 2014

The European Commission has published a first comprehensive review of the financial regulation agenda as a whole. This economic review sets out how the reforms will deliver a safer and more responsible financial system by enhancing financial stability, deepening the single market for financial services and improving its efficiency whilst improving market integrity and confidence. Evidence suggests that the total expected benefits of the financial regulation agenda will outweigh the expected costs, both on a rule-by-rule basis and when considering the reforms as a whole. Many rules create considerable positive synergies, e.g. between the capital requirements package in banking and the reform of derivatives markets. The financial system is already changing and improving. This change will continue as the reforms take effect.

The EU financial regulation agenda is a gradual process. Many legislative measures have only recently been adopted, and some have yet to enter into force. A final assessment would therefore be premature. Accordingly, this economic review is mostly qualitative in nature and should be understood as the beginning of a longer process of systematic review and evaluation of the reforms.

The reforms allow supervisors to oversee markets that had been beyond their reach and provide transparency for all market participants. They establish ambitious new standards to limit excessive risk-taking and make financial institutions more resilient. When there is risk-taking, the burden is shifted away from taxpayers to those who stand to gain financially from the risky activities. The reforms make financial markets work more effectively in the interests of consumers, small and medium-sized enterprises and the economy as a whole.

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