Centro de Documentacao Europeia da Universidade do Minho -

The current financial crisis has affected countries, banks and consumers worldwide. In many European countries financial institutions have gone bankrupt, businesses are closing down, and the real estate business is at halt. This videokit shows some of the consequences of the crisis and illustrates the current financial scenario in some EU Member States.

The European Parliament has proposed and adopted directives, rules and legislations on various topics in order to protect consumers and financial institutions. Some of them are explained below:

Capital requirements for banks
In 2005, Parliament adopted the Capital Requirements Directive, updating EU rules on capital requirements for banks and credit institutions, in line with the Basel II agreement. The overall aim was to create a more sophisticated, risk-based approach to the requirements to hold capital imposed on financial institutions to prevent crisis. The rules came into effect during 2007 and 2008 ? some observers believe the banking crisis would have been less likely if the new system had already been in place. This package left some issues aside, and the Commission has now proposed an update to take account of these and also to deal with issues arising from the crisis, such as the role of securitisation ? see below.
Directive adopted by EP: 28/09/2005

Independence of auditors
MEPs adopted new rules intended to help improve quality audits within the EU and underpin confidence in the functioning of EU capital markets. European auditors and audit firms are required to prove their independence from the management of the audited company.
Directive adopted by EP: 28/09/2005

Bank deposits guaranteed up to ?100 000
If a European bank fails, citizens' savings will be guaranteed up to ?100,000, after Parliament backed legislation raising the guarantee level. The existing minimum guarantee of ?20 000 will first rise to ?50 000 by 30 June 2009, and then ?100 000 by the end of 2010. MEPs also decided that bank customers should be given faster access to their deposits in emergencies and that a mechanism be established for cross-border cooperation in the event of another economic crisis.

Calls for legislation in financial services
MEPs have also taken a broader view of what is needed in the future and have formally requested the Commission to make proposals on a wide range of subjects, some in light of the financial crisis. MEPs requested changes to ensure that a system of capital requirements applies to all financial institutions, regardless of their precise legal form ? this would include hedge funds and private equity vehicles and to ensure the supervision of cross-border financial institutions is put on a firmer footing.

Rules on credit rating agencies
New rules on credit rating agencies, to address perceived conflicts of interest have now started their passage through the EP. Parliament had called for a review in this area on several occasions.

Banking and securitisation
In the light of the financial crisis, the European Parliament will be considering legislation to alter the supervision of the banking sector and the way in which capital requirements are calculated. A key issue is securitisation ? lenders making loans to individuals then selling on the debt as an investment product. The aim is to find a way to ensure the originator of the loan continues to have an interest in seeing it repaid, thereby discouraging reckless lending.

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