Corporate & Securities Law

By James Hamilton

As the European Commission initiative to reform the Lamfalussy process rolls on, Internal Market Commissioner Charlie McCreevy urgently called for the strengthening of the Level 3 committees in order to clarify their duties and properly equip them. In remarks to the EU Parliament Economic Committee, the commissioner said that four reform options are being explored.

The Lamfalussy process of EU financial regulation contains four levels. Level 1 is the adoption of the core Directive, followed by the Level 2 adoption of the implementing Directive. Level 3 involves interpretation by committees like CESR, while Level 4 deals with enforcement.

The first Commission option for reforming Level 3 would be to simply give the Level 3 committees a set of minimum, general responsibilities in the area of regulatory cooperation and convergence. This would be achieved by aligning the Commission decisions which created the Level 3 committees. The second option would be to modify the Commission decisions in order to include a non-exhaustive and flexible list of activities that the Level 3 committees should perform to foster greater regulatory cooperation and convergence. The third option, which the European Commission favors, would be to combine option 2, where necessary, with some targeted modifications to the relevant Level 1 Directives. The fourth option, which perhaps is the most radical, envisions the creation of European regulatory agencies to replace the Level 3 committees. Under this scenario, these agencies could adopt individual technical decisions applicable to market participants.

With regard to option four, noted the commissioner, seeking to transform the Level 3 committees into a single or separate agencies would be highly controversial and divisive. It would risk paralyzing the quick and practical progress that is so urgently needed. Furthermore, in his view, the real added value of this option remains to be demonstrated.

Full post as published by Jim Hamilton's World of Securities Regulation on April 18, 2008 (boomark / email).