The European Commission has published draft legislation today aimed at overhauling the financial sector and bringing in better supervision of banks.
Internal Market and Services Commissioner Charlie McCreevy said the new legislation was intended to remedy shortcomings in European financial supervision and will help prevent future financial crises.
Under the new legislation a watchdog is to be created to detect risks to the financial sector.
The European Systemic Risk Board (ESRB) is meant to issue early warnings. It will also have the power to issue recommendations and warnings to Member States and to the European Supervisory Authorities, which will have to be complied with.
The heads of the ECB, national central banks, the European Supervisory Authorities, and national supervisors, are all set to participate in the ESRB.
In addition to the new watchdog, a new body, known as the European System of Financial Supervisors (ESFS) is to be established to supervise individual financial institutions.
The ESFS will comprise of national supervisors and three new European Supervisory Authorities for the banking, securities and insurance and occupational pensions sectors.
Announcing the draft legislation today, European Commission president José Manuel Barroso said the aim of the new supervisory system is to ensure that past mistakes are not repeated.
"Our aim is to protect European taxpayers from a repeat of the dark days of autumn 2008, when governments had to pour billions of euros into the banks," he said.
