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The ECOFIN Council gathered in Luxembourg on Tuesday to discuss a coordinated European response to financial crisis. The conclusions adopted at the meeting address several of the key points raised by UNI-Finance with its 13 demands on regulation of financial markets.



First, the conclusions address the issue of transparency in financial markets. The ECOFIN Council reaffirms its call on financial institutions to achieve full transparency and will closely monitor the progress achieved in this regard. It welcomes the work of the Committee of European Banking Supervisors (CEBS) on transparency and the efforts most banks make in following the CEBS’ guidelines on good reporting practices.



Second, issue of financial supervision is addressed. Remaining ‘fully committed to enhancing the effectiveness of supervision of the financial sector’, the Council stress the importance of the current amendments of the Capital Requirement Directive (covering areas as risk management, a possible supervisory framework for cross- border groups and enhanced requirements for securitisation in view of further strengthening existing prudential framework). It agrees to set up a European working group to assess more broadly the range of policy responses that might help mitigating undue pro-cyclical effects of the financial system, as the FSF and Basel committee work suggest.



Third, the ECOFIN Council address the issue of executive pay in the finance sector. It recognise that national authorities have a role to play in helping to define an appropriate regulatory framework. It agrees that, in the view of executive pay developments within recent years, the effectiveness of some existing provisions deserves further examination and an update of the Commission’s 2004 Recommendation could be necessary. The Council agree that performance should be properly and comprehensibly reflected in the executive’s pay and linked to the company’s success, and that incitement structures should be aligned with long-term, not short-term, profitability.



The Council also agreed to accept national bail-out plans garanteeing bank deposits aiming at re-establishing financial stability and confidence in and between financial institutions, though this can conflict with EU competition rules.



Though the ECOFIN Council now recognises the urgent need of change in practices in these areas, there is a shortage of new European initiatives to further this development. Immediate and sustainable action is needed to fundamentally change the functioning of the finance sector. Kind requests and recommendations are not enough to change practices. Transparent, reasonable and effective regulation covering all institutions in the financial markets is needed at a global level to ensure that this crisis will not repeat itself at a circular basis.



Some of the important documents from the Council meeting can be found below.







Other ECOFIN Council conclusions can be downloaded here