EU’s McCreevy says no quick fix to market crisis
The European Union’s measured approach to tackling the global financial market crisis was best as no quick fix existed, the bloc’s top market regulator said on Tuesday.
“There is no magic bullet solution that anybody is going to click their fingers like that and everything is solved,” EU Internal Market Commissioner Charlie McCreevy told the European Parliament. He was replying to criticism from EU lawmakers that he and EU policymakers were too slow in responding, as USEurope of taking our time, being realistic, analysing, seeking reliable information is the appropriate one ... I don’t think for one moment that here in the EU we have been behind.” policymakers unveiled plans this week to toughen market regulation. “I miss the vision of what is necessary,” Dutch socialist lawmaker Ieke van den Burg said. But McCreevy responded: “The approach we have adopted in
The crisis continued on Tuesday when Swiss bank UBS and Germany’s Deutsche Bank took a combined $23 billion hit on their risky assets, though their shares rallied on hopes the writedowns could mark a turning point. EU finance ministers and central bankers meet in Slovenia on Friday and Saturday to discuss what regulatory changes are needed in light of the credit crisis that began unnerving investors last August and is threatening economic growth. EU governments last October agreed a roadmap to review and update market regulation, improve responses to cross-border banking crises and make market supervision work better.
McCreevy said markets needed better early warning systems to avoid being caught by the turmoil they face. “The current turmoil shows that early warning systems need to be strengthened,” McCreevy said. Such systems should be handled by the International Monetary Fund at global level. It was also necessary to make parallel improvements to early warning arrangements within the EU, involving central banks, national regulators, ministries of finance and the Commission, McCreevy said. “A similar reflection should be carried out for crisis management,” McCreevy said. He has yet to decide whether laws were needed to oversee credit rating agencies, blamed by some for being too slow to warn investors of the risks of securitized products linked to defaulted US home loans. It was up to the financial industry to sort out the market’s problems but the EU stood ready to intervnew, McCreevy said. "By mid June, the industry should bring forward complete data on markets for structured products. Thereafter, this data should be updated and made available regularly," he added.
So far, the only legal changes expected in the EU stemming from the market crisis involves modifying rules that lay down how much capital all the EU’s 8,000 banks must set aside to cover risks, a legal framework known as Basel II. Some of the changes will focus on making it harder for banks to park risky investments off balance sheets without setting aside some collateral to cover them.
McCreevy said the change to Basel II would include:
*new rules to limit the risk stemming from large exposures
*a harmonization of the definition of hybrid capital
*capital requirements for default risk in trading books
*a definition of the significance of risk transfer
*technical changes to the securitization framework
*a series of changes to ease the administrative burden. (Reuters)
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