I have chosen the ideal time to write about the new regime being established by the EU to ensure that there is not another financial crisis – now when the structure of the eurozone is tottering as a result of the crisis, and the future of the euro and of the EU itself is under severe pressure. It is not a comfortable time within euroland. Living here feels a bit like it did two years ago, when the banks were crashing.

I think everyone is agreed that national responses will not be effective on their own in a global crisis. The classic case is bankers’ bonuses. As we all know – the bankers openly taunt us about it – taking action on bonuses in one country will just send the bankers to another, more lenient jurisdiction.

I have prepared a quick and basic guide to what the EU is doing in the financial crisis, and why. It can be bewildering to follow the individual initiatives without having an overview. It turns out that something is happening on an almost daily basis. I have written before about aspects of the crisis – for instance, corporate governance – but I have tried here to give a general overview. The ‘why’ follows on in the guide immediately after the subject area, and is my personal take in a few words of very complex phenomena. So here we go.

Bankers’ bonuses – because unseemly risk, not attached to the person taking it, was encouraged – I deal with it first since I have already mentioned it, and not because it is the most important. Regulations are being prepared on bankers’ bonuses to set a maximum ratio between salaries and bonuses under amendments to the Capital Requirements Directive.

Hedge funds – because of their unregulated role both in managing vast assets, and in shorting stock and so causing downward spirals – the Directive on Alternative Investment Funds Managers (AIFM), which will bring about their regulation in the EU, passed its last legislative hurdle earlier this month. This is one of the areas where the US is taking action at the same time, bringing hedge funds under the control of the Securities and Exchange Commission.

Credit rating agencies – because they issued AAA ratings for what turned out to be junk, and because of the cosy relationship between themselves and the financial institutions whose products they were rating – the commission has just issued a consultation looking at interesting issues such as whether the small number of such agencies harms competition (rather like the EU consultation on auditors I recently mentioned ), and whether the cosy relationship – in other words, conflict of interests - needs to be investigated.

Overall regulatory structure – because the old EU system was not efficient or integrated, which frustrated strategic action – the financial sector has for some time been divided into three parts at EU level (banks; insurance and occupational pensions; and securities and markets) and each part has now been given its own new supervisory authority. There have been committees which looked after the three areas up to now, but the committees are being upgraded into European agencies with greater powers as from 1 January next year: a European Banking Authority based in London, a European Insurance and Occupational Pensions Authority based in Frankfurt, and a European Securities and Markets Authority based in Paris. There will also be a European System of Financial Supervisors consisting of a network of national financial supervisors working in tandem with the new agencies. At the same time, a European Systemic Risk Board is being established, to monitor and assess potential threats to financial stability that arise from macro-economic developments and from developments within the financial system as a whole. The ESRB is designed to provide an early warning of system-wide risks that may be building up and, where necessary, issue recommendations for action to deal with these risks.

That’s quite a lot of measures. No-one can accuse the EU institutions of idleness here. There is more, too: a proposed directive on Deposit Guarantee Schemes, further possible moves on capital requirements, and general initiatives on the economic (and not just the financial) crisis. On and on it goes. Whether many of these measures will be effective depends partly on whether other important markets take similar action. Now, please excuse me while I rush off and prop up another tottering national economy before we all come crashing down …

Jonathan Goldsmith is the secretary general of the Council of Bars and Law Societies of Europe (CCBE), which represents over 700,000 European lawyers through its member bars and law societies

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