The EU framework of financial crisis management: Some critical reflections

In the aftermath of the recent financial crisis, the regulation of financial markets in the EU has been going through major reform at institutional level as well as in terms of substantive EU law. With respect to the institutional structure of financial regulation, a new generation of EU regulatory agencies will be in place by early 2011. This will comprise, on the one hand, the European Systemic Risk Board (ESRB) which will be responsible for macro-prudential regulation and thus perform a crucial role in crisis prevention and management and, on the other hand, the three European Supervisory Agencies (ESAs) –namely the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA) with key roles in their respective sectors. In relation to substantive law, the Commission’s proposals mainly focus on (a) capital requirements, (b) bank resolution plans and (c) measures that aim to improve consumer confidence as, for instance, the provision of an improved Deposit Guarantee Scheme. It is not the first time that the EU framework of financial regulation undergoes significant reform. However, it is the first time that the issue of financial crisis prevention and management becomes a key driver of the reform agenda. Accordingly, a perennial question to be asked is whether the proposed measures will actually deliver. This essay addresses this question. It overviews the progress of the reform agenda, identifies emerging trends, and offers a first assessment of their strengths and weaknesses.