European supervisory convergence: a new dynamic

Purpose – To describe the 5th May 2006 ECOFIN conclusions on supervisory convergence and explain why they represent a new departure for European financial services work. Design/methodology/approach – The article outlines the 6th 2006 ECOFIN conclusions relating to supervisory convergence. It then reviews EU developments relating to supervisory convergence from the 2001 Lamfalussy Process onwards as context for the conclusions. Finally, in the light of the review and the description of the conclusions it draws some conclusions about the likely implications for further developments in the EU in relation to EU supervisory convergence. Findings – The principal findings are that supervisory convergence is likely to increase due to enhanced political backing with member state finance ministries and regulators taking a leading role. Research limitations/implications – As this is the first paper on the ECOFIN conclusions there is considerable scope for ongoing research to establish the extent to which the predictions in the paper prove to be justified by future developments. Practical implications – The ECOFIN conclusions represent a departure from EU financial services work focused on a legislative programme, the Financial Services Action Plan, to a programme focusing on improving cross‐border relationships between supervisors. This has important implications for the key European actors and gives a strong role to national finance ministries and supervisors. The practical implications will be enhanced cooperation between national supervisors on a cross‐border basis. The paper argues for strong financial services industry involvement in this. Originality/value – The value of the paper is twofold – Its primary value is as the first academic analysis of the ECOFIN conclusions and as a predictor of their likely influence on EU institutional balance in the financial services area. Secondly it is a useful review of the main developments with regard to EU supervisory convergence over the five years 2001‐2006 – something which, to be the best of my knowledge, has not previously been carried out in the academic literature.