Europe’s large companies and financial institutions express strong levels of support for several sweeping proposals for regulatory reform, including the establishment of government entities to set standards for all EU governments for the supervision of banks, insurers and other financial firms.
Almost two-thirds (63%) of the 138 large European financial institutions and companies participating in a Greenwich Market Pulse in late July say they are in favour of the creation of pan-European regulatory bodies such as the Committee of European Securities Regulators (CESR), the Committee of European Banking Supervisors (CEBS) and the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS). More than a quarter of respondents say they would ‘strongly support’ the establishment of these bodies and only 15% say they would oppose this step. Among corporations, support levels near 70%, with almost 30% strongly in favour.
“There is a significant group of companies and financial institutions – some 22% of the total that remain neutral to the establishment of these pan-European bodies,” said Greenwich Associates consultant Robert Statius-Muller. “So although there is broad support for this approach, much will depend on how these new bodies are composed and empowered to enforce standards on individual European governments.”
Greenwich Associates also asked companies and financial institutions to rate their level of support for some specific proposals from European regulators:
- Stimulus spending: More than 40% of large companies and financial institutions in Europe oppose any additional stimulus spending by the major European governments, with 30% in favour of more stimulus and 30% on the fence. Levels of support and opposition are roughly consistent across corporations and financial institutions.
- Stress testing: Almost 60% of large European companies and financial institutions would support government conducted ‘stress tests’ of the region’s banks similar to those carried out in the US. “It is interesting to note that support for stress testing is actually higher among the European banks themselves than among corporations,” said Greenwich Associates consultant John Colon. “Three-quarters of banks support public stress tests, compared to only about half of companies.”
- New rules for hedge funds: Almost 65% of large European companies and financial institutions support proposals from the European Commission (EC) that would require registration of alternative fund managers with regulatory authorities and set new standards on hedge fund reporting, governance, risk management, and minimum capital requirements. Included in that overall level of support are 27% of survey respondents who say they would ‘strongly support’ these measures.
Rating Government Response to the Crisis
Europe’s largest corporations and financial institutions give good – but not great – ratings to their respective national governments for their actions in response to global economic and financial crisis. Overall, 43% of European survey respondents give positive marks to their governments’ response to the crisis, including 37% rating that response as ‘good’ and 6% rating it ‘excellent’. On the opposite side of the ledger, 30% give their governments’ negative ratings, including a quarter who rate the performance as ‘poor’ and 5% who rate it ‘very poor’.
When asked to rate the performance of the EU in dealing with the crisis, 46% of European survey participants provide a ‘neutral’ response. However, 37% give the EU negative ratings, including 29% rating the performance as ‘poor’ and 8% rating it ‘very poor’.
“Only 17% of Europe’s large companies and financial institutions would give the EU a positive rating for its performance in responding to the crisis,” said Statius-Muller.
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