Summary from the informal ECOFIN meeting on 4-5 April
Date
11/04/2008
On 4 and 5 April Riksbank Governor Stefan Ingves and Minister of Finance Anders Borg met central bank governors and finance ministers of other EU countries in Slovenia, which is holding the EU presidency during the first half of 2008.
The central bank governors and finance ministers discussed the current economic and financial situation. The financial market turmoil has continued and they envisaged some negative effects for economic developments. Last autumn the ECOFIN expressed its support of a work plan of measures to deal with the existing weaknesses. This includes banks and other financial companies openly reporting their risk exposures and losses, questions regarding the evaluation of illiquid assets (which can be difficult to obtain a market price for), a review of regulations (such as the EU’s capital adequacy directive, the banks' own risk management) and the role of credit rating agencies. A follow-up of this work plan was made at the meeting.
The informal ECOFIN meeting took a concrete step to reinforce the financial stability of the EU, that is, the ability of the EU to manage problems in cross-border financial companies. A new Memorandum of Understanding was signed on how authorities shall cooperate in the case of cross-border crises. The new agreement will be tested in a crisis exercise to be held at EU level in 2009.
The meeting also took up a number of suggestions for improving financial sector supervision in the EU. The aim is to achieve a more harmonised regulatory framework in the EU and the informal ECOFIN supported a proposal to strengthen the EU’s committees for supervision, in which joint guidelines are agreed as to how regulations shall be interpreted and applied by the national financial supervisory authorities. The informal ECOFIN meeting also took steps to improve the supervision of cross-border banks by supporting a proposal to form colleges of supervisors for these banks, consisting of the financial supervisory authorities concerned. At present there are some of these in place, but now this form of cooperation will be extended to cover more financial companies.
The informal ECOFIN meeting also discussed securities clearing and settlement, that is, the implementation of an agreed securities transaction. The problem is that the EU lacks a uniform market for securities settlement, which leads to high costs. The EU has long worked on various initiatives to reinforce the internal market for clearing and settlement. A concrete step was taken at the meeting in that the participants agreed on joint recommendations that should be met by companies conducting securities settlement business.
Finally, the informal ECOFIN meeting prepared for the coming spring meetings of the International Monetary Fund and the World Bank.
Facts:
Informal ECOFIN meetings are held twice a year, bringing together the central bank governors and finance ministers of the EU member states. The relevant EU commissioners also take part in the meetings, as well as the President of the European Central Bank. No formal decisions are taken on these occasions, but political agreements can be reached regarding the continued cooperation within the EU. They also provide an opportunity to discuss current issues.
If you have any questions, please contact Johanna Lybeck Lilja at telephone number +46-(0)8-787 00 00 (switchboard)
Do you want to read more? Follow the link below to the website of the Slovenian presidency.
