Lucinda Creighton (Dublin South East, Fine Gael)
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Question 162: To ask the Minister for Finance his views on the creation of a European systemic risk board; and if he will make a statement on the matter. [46848/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The legislative proposal to create a European Systemic Risk Board (ESRB) is designed to put a regime in place to monitor and assess risks to the stability of the financial system as a whole (what is called "macro-prudential supervision"). This proposal was one of the key recommendations contained in the Report of the High Level Group on Financial Supervision in the EU, which was published on the 25th of February 2009, — the so-called "de Larosière Report". The ESRB, will provide early warning of systemic risks that may be building up in the financial system and, where necessary, issue recommendations for action to deal with these risks.

The creation of the ESRB is part of a suite of measures, which also includes the establishment of three new European Supervisory Authorities for the banking, investment services and insurance and pensions sectors. These new Authorities will play a key role in ensuring that there is better co-ordination between supervisors in situations where a financial institution might be operating on a cross-border basis within the EU. They will also be required to ensure that EU financial services legislation is being implemented in a more uniform manner across Member States and, in that regard, will develop a single rule-book to ensure a more harmonised approach by supervisors.

The establishment of the ESRB will address what has been identified as a major priority in the strengthening of financial regulation internationally by ensuring that there is a strong focus on the stability of the overall financial system alongside closely monitoring the soundness of individual financial institutions. The creation of the ESRB is in line with several international initiatives that have been put in place for this purpose, including the establishment of the Financial Stability Board. The heads of the European Central Bank, national central banks, the proposed new European Supervisory Authorities, as well as national regulatory bodies will participate in the European Systemic Risk Board.

To achieve its role the ESRB will have the power to issue non-binding recommendations and warnings to Member States (including the national supervisors) and to the European Supervisory Authorities, the response to which will be closely scrutinised by a 'comply or explain' mechanism. I have been a very strong supporter of these proposed reforms and I particularly welcome the closer involvement of the European Central Bank, especially with regard to monitoring possible instances of systemic risk.

The Deputy should be aware that these proposals have now been examined by three Joint Oireachtas Committees — the Joint Committee on European Affairs, the Joint Committee on Finance and the Public Service, and the Joint Committee on European Scrutiny . A report of the Joint Committee on European Scrutiny was discussed in the Dáil on 28 January last. This examination by the Oireachtas Committees has helped contribute to Ireland's participation in the negotiations carried out at Council level.