Finally, the cards are beginning to land. A few weeks ago European governments were prevaricating between more Europe or less Europe, its now clear that we have opted for the former. Even Gordon Brown has set aside his scepticism on the subject, during a speech he made yesterday he proclaimed the UKs willingness to engage with Europe. He even went so far as to say that he is proud to be European whod have thought it.So now that weve all decided that Europe is a good idea, what happens next? How do we start the process of more Europe? According to the de Larosiere Report, the best place to start is the understanding and monitoring of systemic risk across Europe. Only with this structure in place can we measure risk across in the system and put in place an early warning system which will prevent micro risks from spiraling into macro or systemic risks.Great in theory, but how can this possibly work in practice? Financial institutions simply do not have the transaction reporting practices in place to enable them to provide timely information to national supervisors. That said, it is achievable. If all financial institutions, irrespective of their classification, were to adopt simple, harmonized operational practices, the necessary building blocks would be in place for universal transaction reporting. This would make de Larosieres two tier supervisory framework a very viable solution. Of course, there would need to be a pan-European agency responsible for collating the systemic risk data and feeding it through to the necessary bodies. A natural candidate for such a job would be the ECB, a body which in its own words stands ready to assist the market. Whether it will be granted the role or not, remains to be seen. There is a long way to go before we approach this kind of granularity. The first step to more Europe has to involve a co-ordinated approach to solving the shortcomings of the supervisory and regulatory infrastructure of the European financial markets. Some believe that this weeks G20 summit will provide a basis on which to launch a globally co-ordinated effort to address issues relating to the financial crisis. Personally, I believe that before we engage in the debate at a global level, we need to demonstrate that we have agreement at the European level on topics such as supervisory infrastructure. At present it seems that more Europe is all words and little action.
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