French President Sarkozy called for a new form of capitalism. No financial institution should escape regulation and supervision, he says in the statement introducing the meeting. The system must be completely overhauled.
European Council Conclusions
The European Council expressed its resolve to act in a concerted and comprehensive manner to protect the European financial system and depositors.
Financial Crisis Cell
To enable speedy and effective action to be taken in a crisis situation, an informal warning, information-exchange and evaluation mechanism (the financial crisis cell) will be established.
This mechanism will bring together representatives of the Presidency-in-office, the President of the Commission, the President of the ECB (in conjunction with the other European central banks), the President of the Eurogroup and the governments of the Member States. It will be based on existing administrative structures, may be activated at any time by a Member State faced with a crisis and will ensure that information is provided immediately and in confidence to the institutions and all the Member States. It will also help to ensure smooth coordination of actions taken or to be taken.
The European Council requests the Council to finalise as soon as possible the procedures for the setting up and operation of the financial crisis cell.
Supervision
The European Council stresses the need to strengthen the supervision of the European financial sector, particularly cross-border groups, and to implement urgently the Ecofin Council's roadmap, with a view to improving the coordination of supervision at European level. In this context the European Council welcomes the setting up of a high-level group by the Commission. To begin with, the European Council invites national supervisors to meet at least once a month, to exchange information.
Forthcoming legislative proposals
In addition, the European Council calls for a speedy examination of the Commission's forthcoming legislative proposal to strengthen the rules on rating agencies and their supervision at European level. It calls for speedy decisions on the development of European rules on the security of deposits to ensure that savers are protected, and welcomes the decision taken concerning the accounting standards applicable to financial institutions and their interpretation.
Furthermore, the European Council calls for more general consideration, in consultation with the international partners, of the effects that fair value and mark-to-market accounting would have on financial institutions and on the market, including their procyclical effects. The European Council supports the speeding up of work to strengthen the rules on stability, including work on the Capital Requirements Directive.
The real performance of company executives should be reflected in their remuneration, including their severance pay ("golden parachutes"), which should be in line with their actual contribution to the success of the company. Likewise, care should be taken to ensure that earnings from stock options or the system of remuneration, especially in the financial sector, do not lead to excessive risk-taking or extreme concentration on short-term objectives. The European Council calls on the Member States to work to put these principles into practice and calls on the Council to report back on the decisions taken by the end of the year.
The so-called Bretton-Woods II
The European Union must work with its international partners on a genuine, all-encompassing reform of the international financial system based on the principles of transparency, sound banking, responsibility, integrity and world governance.
The aim is to take early decisions on transparency, global standards of regulation, cross-border supervision and crisis management, to avoid conflicts of interest and to create an early warning system, so as to engender confidence among savers and investors in every country. The Union will quickly take appropriate initiatives in consultation with its main partners and the relevant international financial institutions.
Council Conclusions (French)
Council Conclusions (English)
Council Presidency - The system must be completely overhauled
Introducing to the European Council the French Presidency called for a “new form of capitalism”. No financial institution should escape regulation and supervision, President Sarkozy says in the statement. I am thinking, for example, of the regulation that we must apply to the rating agencies, and of the necessary supervision of hedge funds.
Further issues include accounting standards, and remuneration issue.
“World economic governance is too fragmented”, the statement says. “We must look for a new mode of coordination between all the players involved: international organisations, regulatory and supervisory authorities, and more generally all the fora that produce standards in the economic sphere.”
Statement
Summit Declaration on a concerted European Action Plan
Euro Area countries released a Summit Declaration on a concerted European Action Plan of the Euro Area Countries.
The declaration states:
“We confirm today our commitment to act together in a decisive and comprehensive way in order to restore confidence and the proper functioning of the financial system, aiming at restoring appropriate and efficient financing conditions for the economy. In parallel, Member States agree to coordinate measures to address the consequences of the financial crisis on the real economy, in line with the Ecofin conclusions of 7 October.”
The declaration also notes that further concerted action is urgently needed given the persistent problems of bank financing and the contagion from the financial crisis to the real economy.
“We invite our European partners to adopt the following principles so that the European Union as a whole can act in a united manner and avoid that national measures adversely affect the functioning of the single market or the other Member States. This requires the European Union and Euro area governments, central banks and supervisors to agree to a coordinated approach aiming at:
- ensuring appropriate liquidity conditions for financial institutions;
- facilitating the funding of banks, which is currently constrained;
- providing financial institutions with additional capital resources so as to continue to ensure the proper financing of the economy;
- allowing for an efficient recapitalisation of distressed banks;
- ensuring sufficient flexibility in the implementation of accounting rules given current exceptional market circumstances;
- enhancing cooperation procedures among European countries.
Summit Declaration
© Council of the European Union
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