Question

In a 300-word essay, explain and contrast the financial supervision reforms that the European Union, the United Kingdom, and the United States have pursued to address the recent financial crisis.

Answer 1

The financial supervision reforms undertaken by European Union (EU) focus on making the financial framework for Europe stronger besides proposing a banking union for the Euro zone. The underlying theme of the financial supervision reforms of EU is that the financial sector should be subjected to better regulation and supervision. In fact after the financial crisis the EU had proposed as many as 30 sets of rules and these rules encompasses all financial products and all financial markets within EU. The 30 sets of rules have been implemented to ensure that the financial sector in EU is not only appropriately regulated but also efficiently supervised.

In contrast the financial supervision reforms undertaken by United Kingdom (UK) have led to fundamental changes to its financial regulatory regime. It also led to the creation of a single, all-encompassing and a powerful regulator within United Kingdom. The regulatory role of central bank was significantly limited within UK and this was done by emphasizing on financial regulation as a core policy issue of UK. The United Kingdom established Financial Policy Committee (FPC) and this committee are based on the Financial Service Bill. FPC is now responsible for monitoring systematic risk that the Bank of England (BoE) is exposed to.

The approach by USA has been the most aggressive. USA focused on the long term approach of preserving and guaranteeing systematic stability and consumer protection through its financial supervision reforms. USA has constructed legal frameworks for the purpose of maintaining systematic stability. Financial Stability Oversight Council (FSOC) is an outcome of this initiative and effort of USA to develop a legal framework. The focus in USA has now shifted clearly from micro-prudence to macro-prudence. This shift in focus will clearly help USA to enhance the levels of financial stability in the long run on a sustainable basis.

(302 words)