At Thursday’s working session at the informal ECOFIN meeting in Göteborg, EU finance ministers and central bank governors had a useful discussion on a number of topics: the economic and financial situation, the Commission’s proposals for a strengthened EU framework for financial supervision, and the need to enhance the EU’s financial stability arrangements.

Swedish Minister for Finance Anders Borg was very satisfied with the outcome of the meeting, noting that, “We need to deal with difficult issues in difficult times. There is broad consensus that we must make swift progress to promote financial stability and to enhance European financial regulation and supervision.”

Ministers and governors were debriefed on the outcome of the G20 summit in Pittsburgh. These agreements will now be implemented, in particular regarding restrictions on bonuses and compensation in the financial sector. Minister for Finance Anders Borg remarked that, “The ghosts of greed cannot easily be chained down, but bankers should not underestimate the political commitment to putting a stop to the banks' harmful practices .”

A tentative recovery is under way
On the economic and financial situation, ministers and governors discussed the emerging signs that the economic and financial crisis has started to bottom out and that a tentative recovery is under way. However, the global financial system is still fragile and economic activity remains weak. Ministers and governors were also given a presentation of the EU-wide stress test and welcomed that banks in the EU are broadly able to withstand the crisis, but emphasised that banks need to continue to strengthen their financial positions. See the separate statement on this issue.

Steps to enhance EU financial stability arrangements
Ministers and governors also discussed the strengthening of EU cross-border stability arrangements, and how to move forward on these issues. Stability in the financial system rests on a coherent approach to crisis prevention, management and resolution. In this regard ministers broadly supported a range of measures to be taken in the next 6-12 month period based on a road map presented by the EFC. This work will continue along two closely interrelated strands. One is to enhance the coordination arrangements among governments and other relevant parties. The other is more efficient regulation as regards, in particular, early intervention and bank resolution. The ECOFIN will return to this issue at their meeting in October.

The new EU financial supervisory structure is a key priority
A key item at Thursday’s session was the Commission’s proposals on a new structure for financial supervision. There was broad support to deal with this very urgent issue in a swift manner, based on the conclusions of the European Council on 18-19 June 2009, with the ambition to reach a general approach regarding the European Systemic Risk Board (ESRB) in October. This will therefore be on the agenda at the ECOFIN meeting on 20 October and reported to the 29-30 October European Council.

In parallel, the negotiations on the European System of Financial Supervision (ESFS) will aim to reach a general approach at the December ECOFIN. Both work streams will be reported to the December European Council under the Swedish Presidency.

Swedish Minister for Finance Anders Borg emphasised the importance of making progress on this topic: “It is our intention to report an agreement for the whole financial supervision package to the European Council in December, which will send a strong signal to our global partners that the EU has now taken its responsibility to strengthen the European supervisory framework.”

Swedish Minister for Financial Markets, Mats Odell, added that he too was pleased that significant progress had been achieved on the topic of financial supervision.