Tomorrow will see the ECs long awaited response to the de Larosiere Report. For those of us that have watched the battle for power in the new supervisory framework it will be day of reckoning. The main bone of contention is governance of Europes Systematic Risk Council (ESRC) where the Commission has to balance the requirement for a streamlined structure with the European political reality that every nation wants to be represented.
The Commission is expected is support de Larosieres recommendations that the ESRC Chairman should be the President of the ECB, but it is more likely to propose that this be left open to the membership of the ESRC to decide. If the membership opted for the President, it is expected that the vice chairperson would be elected from those Member states outside of the euro area. This could create an interesting but bizarre triangle of leadership a French president of a German based organisation with a British deputy.
While this new structure may bring some much needed pan-European co-ordination to Europes financial markets, it still does not address the global issue of systemic risk. We still need some form of international co-ordination which can at the very least set global standards. This, I believe would be best achieved in the shape of a World Securities Organisation.
Why the hell not? Airlines have IATA; pandemics are managed by the WHO; and energy markets are monitored by the IEA. These entities are not regulators, they are international co-ordinators, standard-setters and lobbyists. They face off to governments and act as crisis managers. Market participants operate within the laws of the markets in which they operate – and global legal systems will never be harmonized – but where they can co-operate for everyones benefit they do.
The strapline of the IEA website is “Energy Security Growth and Sustainability through Co-operation and Outreach.” If you substitute Financial Markets” for “Energy” in virtually any of the IEA material, you have a blueprint for an equivalent body for the financial markets. Its high time an organisation like this was created.