The De Larosière Group

The de Larosière Group

Jacques de Larosière Chairman

Leszek Balcerowicz Otmar Issing Rainer Masera Callum Mc Carthy Lars Nyberg José Pérez Onno Ruding

Secretariat of the Group David Wright, Rapporteur, DG Internal Market Matthias Mors, Secretariat, DG Economic and Financial Affairs Martin Merlin, Secretariat, DG Internal Market Laurence Houbar, Secretariat, DG Internal Market

1TABLE OF CONTENTS
AVANT-PROPOS .................................................................................................................... 3 DISCLAIMER.......................................................................................................................... 5INTRODUCTION.................................................................................................................... 6 CHAPTER I: CAUSES OF THE FINANCIAL CRISIS...................................................... 7 CHAPTER II: POLICY AND REGULATORY REPAIR................................................. 13 I. II. INTRODUCTION........................................................................................................ 13 THE LINK BETWEEN MACROECONOMIC AND REGULATORY POLICY .... 14III. CORRECTING REGULATORY WEAKNESSES..................................................... 15 IV. EQUIPPING EUROPE WITH A CONSISTENT SET OF RULES............................ 27 V. CORPORATE GOVERNANCE.................................................................................. 29 VI. CRISIS MANAGEMENT AND RESOLUTION........................................................ 32 CHAPTER III: EUSUPERVISORY REPAIR................................................................... 38 I. II. INTRODUCTION........................................................................................................ 38 LESSONS FROM THE CRISIS: WHAT WENT WRONG? ..................................... 39

III. WHAT TO DO: BUILDING A EUROPEAN SYSTEM OF SUPERVISION AND CRISISMANAGEMENT.................................................................................. 42 IV. THE PROCESS LEADING TO THE CREATION OF A EUROPEAN SYSTEM OF FINANCIAL SUPERVISION ............................................................................... 48 V. REVIEWING AND POSSIBLY STRENGTHENING THE EUROPEAN SYSTEM OF FINANCIAL SUPERVISION (ESFS).................................................. 58 PROMOTING FINANCIALSTABILITY AT THE GLOBAL LEVEL.................... 59 REGULATORY CONSISTENCY .............................................................................. 60

CHAPTER IV: GLOBAL REPAIR ..................................................................................... 59 I. II.

III. ENHANCING COOPERATION AMONG SUPERVISORS ..................................... 61 IV. MACROECONOMIC SURVEILLANCEAND CRISIS PREVENTION ................ 63 V. CRISIS MANAGEMENT AND RESOLUTION........................................................ 66 VI. EUROPEAN GOVERNANCE AT THE INTERNATIONAL LEVEL...................... 67 VII. DEEPENING THE EU'S BILATERAL FINANCIAL RELATIONS ........................ 67 ANNEX I: ANNEX II: MANDATE FOR THE HIGH-LEVEL EXPERT GROUP ON FINANCIAL SUPERVISION IN THE EU................................................. 69 MEETINGS OF THE GROUP AND HEARINGS IN 2008 - 2009 ........... 70

ANNEX III: AN INCREASINGLY INTEGRATED SINGLE EUROPEAN FINANCIAL MARKET ................................................................................ 71 ANNEX IV: RECENT ATTEMPTS TO STRENGTHEN SUPERVISION IN THE EU.................................................................................................... 75 ANNEX V: ALLOCATION OF COMPETENCES BETWEEN NATIONAL SUPERVISORS AND THE AUTHORITIES IN THE ESFS………. ....... 78

2

AVANT-PROPOS
I would like to thank the President of the European Commission, José Manuel Barroso, for the very important mandate he conferred on me in October 2008 to chair an outstanding group of people to give advice on the future of European...