The European Union's financial regulators have been told that they need to cooperate more effectively if they are to tackle problems in the financial sector.
According to the chief executive of the British Bankers' Association (BBA), radical change to the European banking regulatory structure is not necessary, but an improvement in coordination and cooperation is needed to provide stability and consistency for financial institutions. Angela Knight explained that the current framework, known as the Lamfalussy process, does not need to be entirely done away with and she rejected suggestions that a pan-European watchdog should be established for the region's financial sector.
Speaking to Reuters, Ms Knight claimed that the benefit of the current regime is the flexibility it allows each individual country to regulate the financial sector in accordance with its own approach to the industry. She argued that a centralised system "would be rigid, slower and not necessarily bring more benefits than moving towards a lead regulator proposal".
The European Union is preparing to review the regulations as they stand under the Lamfalussy process, which was established seven years ago as part of an effort to implement a wide variety of European regulations aiming to bring the different financial systems of the EU's member states into line with each other, so as to reduce the potential for inconsistent supervision.
However, the timing of the review of the rules comes as the global economy struggles with the impact of a credit crunch, brought on by the collapse of the sub-prime market in the US. Some experts have argued for an overhaul of the system in an effort to ensure that the European market will not be able to fall into the same trap as seen in the US and to bolster responsible lending.
Ms Knight warns that a hasty response to the problems affecting the global financial markets could have a negative impact on the European Union's banking industry in the long-term. The BBA has submitted its views on the Lamfalussy review to the EU and in it the organisation argues: "Where possible, regulators should seek solutions which can be achieved working with the industry and the markets, rather than making new rules as a first option."
Any changes to the Lamfalussy process will have to be agreed by the European Parliament and the European Commission, as well as all member states.