JURIST - Paper Chase: EU proposes regulations to address future financial crises

[JURIST] The European Commission [official website] on Wednesday announced [press release] a proposal [text, PDF] that would address the problems of bailing out large banks with public funds during financial crises in the future. The proposal rests on Article 114 of the Treaty on the Functioning of the EU (TFEU) [text, PDF] which "allows the adoption of measures for the approximation of national provisions which have as their object the establishment and functioning of the international market." It is designed to prepare, recover and resolve problems all credit institutions and certain investment firms may face during a financial crisis. Rather than setting up a powerful central banking system, the Commission proposed that the member states set up financial arrangements to prevent bank failure strengthening states' role in the newly proposed measure. The 171-page proposal is a response to the financial crisis of 2008 in which the European public authorities had to bail out large financial institutions from failure leading the European Commission to approve 4.5 trillion euros (equivalent to 37 percent of EU GDP) to go to those failing companies. The proposal is not expected to take effect until 2018.

Several EU member states face financial instability which may have detrimental effects on other member states. Earlier this month, Ireland voters approved [JURIST report] the Treaty on Stability, Coordination and Governance [text, PDF] aimed at improving fiscal discipline and promoting greater financial information disclosure between EU member states because of its current financial situation. The treaty was signed [JURIST report] by leaders from 25 EU member states in March. Only two countries, the UK and the Czech Republic, did not sign the measure. A year after the financial crisis of 2008, a European Council [official website] decided to create [JURIST report] a new European financial supervisory and monitoring system which seeks to balance the need of coordinating efforts on financial supervision, particularly in times of crisis, with the autonomy of each member nation over their own financial stability.