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EU reclaims misspent farm funds ... laws obliging banks to keep more of their riskiest securities on their books, accept multinational regulation and exchange more information amidst the ongoing financial crisis. "Learning from recent events, it is critical that there are procedures and policies that ensure the availability of liquidity in times of stress.
As we have witnessed, when liquidity dries up the blood just stops flowing and life just withers away," EU Internal Markets Commissioner Charlie McCreevy told journalists in Brussels.
Barroso calls for coordinated action EU Commission President Jose Manuel Barroso said Wednesday Europe needs to "inject credibility" into its efforts to tackle the current financial crisis, as a major US banking bailout hangs in the balance.
Bildunterschrift: Großansicht des Bildes mit der Bildunterschrift: Barroso wants the EU to firm up its banking supervision structures "We are asking and urging member states for closer cooperation. It is critically important for confidence in the markets," Barroso said.
Barroso said the existing system of regulation, based largely on national governments and regulators, could cope with the current crisis, but the European Union needed to go further in coordinated action to restore full confidence.
"We need a further strengthening of the supervision structures at European level," he told a news conference on Wednesday.
Rebuffing French calls for EU limits on state aid to be suspended or revised in the light of the crisi, Barroso said upholding the competition rules was vital, but the Commission would apply them flexibly.
Tighter rules for multinational banks Under the EU proposals, banks will not be allowed to lend more than 25 percent of their total funds to any single debtor, and will have to keep on their books at least 5 percent of any high-risk assets, such as mortgages, which they trade on as securities.
They will have to accept tighter rules on what types of securities they can count towards their capital, and will have to carry out rigorous tests on any high-risk assets they accept from other banks.
And they will have to accept the guidance of "colleges of supervisors" drawn from the regulatory bodies of every EU state in which they have branches.
Such regulators should be brought in to oversee some 40 major multinational banks, McCreevy said.
"No longer will any bank be able to place reliance on credit rating agencies for their risk analysis. No longer will they be able to buy securitized assets without ensuring that the originator of those assets retains a net economic interest in them," he said.
Proposals come amid European bank turmoil Work on the reform began in October 2007, as the meltdown in the US market for high-risk mortgages began to trigger financial chaos around the world.
Bildunterschrift: Großansicht des Bildes mit der Bildunterschrift: Embattled mortgage lender Bradford and Bingley can look forward to a state bail-out And in a sign of the ongoing pressure on European banks, McCreevy made his presentation just two hours after the EU Commission approved the British government's nationalization and sale of battered mortgage lender Bradford & Bingley and launched a probe into German state support for the WestLB bank.
The British move, made Monday, followed the state rescue of Benelux banking giant Fortis, which the governments of Belgium, the Netherlands and Luxembourg partially privatized over the weekend to stave off a threatened financial collapse.
It also followed a 6.4-billion-euro ($9.2 billion) bail-out of Franco-Belgian bank Dexia by France, Belgium and Luxembourg.
The Fortis bail-out, organised by the three countries' regulators, shows how international supervision should work, McCreevy said.
"This was a success and we need to build on it ... It is important for such cooperation to be enshrined in the (European) regulatory framework for normal and crisis times," he said.
New credit operating rules to come Within the next few weeks McCreevy is expected to present a second proposal detailing the new responsibilities and rules of operation for credit-rating agencies -- bodies who have been widely accused of failing to raise the alarm over the market in high-risk mortgages.
But he stressed that Wednesday's proposal should itself lead to changes in the market for credit ratings, as it puts the onus on the issuers of mortgage-backed securities to supply detailed data on their products to potential investors.
"The proposal, as structured, should facilitate the emergence of 'investor-pays' rating services that will challenge the views and ratings of the (current) 'issuer-pays' model ... The latter model contains inherent conflicts of interest," McCreevy said.
McCreevy's proposals will have to be approved by member states and the European Parliament. The leaders of the EU's top economies are set to discuss the financial crisis in Paris on Saturday, while all EU leaders are set to debate it in a summit on Oct. 15.
(Deutsche Welle)
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