European Union nations agreed to create new financial oversight institutions today, hoping to prevent a repeat of the government debt crisis that nearly left Greece bankrupt and brought the European banking system to its knees.
The union’s 27 finance ministers also agreed to give Greece the next chunk of its bailout funds but failed to find common ground on the introduction of a levy on banks or on a new tax on financial trading.
The ministers, called Ecofin, decided to establish a new supervisory board over the financial industry and demand a more transparent sharing of government budgetary information, a move prompted by the dubious accounting practices in Greece over the last few years.
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The systemic risk board, the principal new body backed Tuesday, will be chaired by European Central Bank president Jean-Claude Trichet out of Frankfurt. It still needs the formal backing of the European Parliament, but that is expected later this month.
This shows the willingness of European countries to “put behind national interests for the sake of Europe,” said Wolfgang Schaeuble, Germany’s finance minister.
Belgium’s finance minister Didier Reynders, who chaired the meeting, said stricter supervision was one of the most important lessons from the government debt crisis and insisted the deal was necessary now to make sure the new risk board begins work at the start of 2011.
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The EU reforms echo recent changes enacted in the United States, where a new council of regulators, led by the Treasury Secretary, has been established to monitor threats to the financial system.
The US has also created a new powerful independent consumer financial protection bureau within the Federal Reserve to write and enforce new regulations covering lending and credit.