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Supervision of cross-border Banking Groups has been discussed at length over the last couple of years. The first step was the adoption of the CRD in 2006 with an innovative regime for model validation. The powers of the consolidating supervisors were significantly increased. This has been very effective for supervisory cooperation. For some groups, colleges of supervisors have been established. Pushing the debate further, the Commission organised a conference on supervisory arrangements in June 2007. Most industry representatives felt that a 'lead supervisor' model together with a reinforcement of the Committee of European Banking Supervisors (CEBS) would create further efficiencies. Some participants also suggested moving towards a European system of financial supervisors.
We have listened to industry's plea for further efficiency. We have also listened to Ministries of Finance, central bankers and supervisors. Although efficiency is paramount, effectiveness of supervision and financial stability concerns remain key, especially in these times of market turbulence. Efficiency and stability go hand in hand.
The Commission will propose amendments to the CRD on 'colleges', to increase the efficiency of supervision. This proposal should be available around the end of this month. I hope that the French presidency reaches political agreement on this text. For financial stability, we will further develop our policy in a White Paper to be published next year on early intervention tools for dealing with ailing banks.
There is consensus that colleges of supervisors are the best way at this stage to facilitate the supervision of cross-border banking groups. Following the consultation process my conclusions are that colleges should remain flexible so as to cater for different circumstances and different organisational structures. But clear objectives for colleges should be set. There should be consistent application of requirements within banking groups. There should be no duplication of requirements and information requests. Colleges should also be effective in dealing with group-wide issues. And we have decided to reinforce the powers of the consolidating supervisor for two supervisory aspects, namely capital add-ons for subsidiaries (Pillar 2) and prudential reporting requirements.
We're aware that if colleges develop diverging approaches, we run the risk of further fragmentation of the internal market, and even within a Member State itself. That is why CEBS must play a key role in ensuring consistency in approaches across colleges. This role will be cemented in the CRD proposal. Some stakeholders consider that there would be merit in proposing further institutional changes. I have advocated an evolution rather than a revolutionary approach. We also have to be pragmatic about what is achievable now. It is crucial we make progress on strengthening our supervisory co-operation. Maybe at some point in time in the future we will have some form of EU level supervision for the largest financial institutions. But I don't believe we have the necessary conditions today for such a fundamental change. I will be pressing Member States to agree on a well functioning College of Supervisors so that we can address the most important and urgent needs in strengthening supervision of cross frontier institutions.
On the matter of stress situations within banking groups, I'd like to make a couple of points. Let's imagine the failure of a cross-border bank. Are cooperation arrangements between Ministries of Finance, Central Banks and Supervisors fit-for-purpose? All Member States operate some form of early intervention mechanism in order to handle a crisis in an ailing bank. But the nature of the measures differ across Member States. While speedy action may be critically important to the survival of the institution or to minimise costs, such differences have the potential to complicate or impair efficient cross-border crisis handling. The Commission is committed to addressing those issues in next year's White Paper on early intervention.
In conclusion, a lot of work is still needed to complete our supervisory framework. But we need to remain ambitious and realistic. We need concrete results sooner rather than later.
