The EU has already taken important steps to foster regulatory and supervisory convergence and cooperation in recent years. The introduction of an enhanced institutional setting for financial regulation and supervision with the Lamfalussy framework has been a milestone in this respect, coupled with improvements to the EU legislative framework for financial services, including in particular the adoption of the Financial Services Action Plan and the respective follow-up policy for the period 2005-2010. However, the first full review of the Lamfalussy framework by ECOFIN in December 2007 demonstrated that the new institutional setting has not yet reached its full potential. While the review confirmed the widely shared assessment that the Lamfalussy framework has greatly enhanced the EU regulatory and supervisory process in recent years, it also underlined that the optimal level of cross-border convergence and cooperation has not yet been attained. In order to move forward, the December 2007 ECOFIN pointed to the need to: (i) strengthen the roles, tools and decision-making procedures of the EU committees of supervisors; (ii) enhance the supervisory arrangements for cross-border financial groups by improving the functioning of the supervisory colleges formed by the competent home and host supervisors; and (iii) consider introducing a reference to the EU in the mandates of national supervisors. The ECOFIN Council set out a specific roadmap for achieving progress on these issues by the end of 2008. The Eurosystem strongly supports these initiatives.

To ensure progress towards best practices in this field as well as to respond to the increasing need for the effective cross-border mobilisation of liquidity, closer coherence of supervisory requirements and approaches with respect to liquidity risk is also warranted. The recently published consultation paper by the Basel Committee on “Principles for Sound Liquidity Risk Management and Supervision” constitutes an important starting point in that direction. Finally, the institutional arrangements for cross-border cooperation among authorities should be further enhanced, both during situations of financial distress and in normal times. As regards crisis management arrangements, one priority in my view will be to clarify responsibilities and procedures to support timely and well-targeted public sector action. The recently agreed EU-wide Memorandum of Understanding between supervisory authorities, central banks and finance ministries on cooperation in cross-border financial crisis situations could also serve as a basis for improvements at the international level. With regard to ongoing supervision, I fully support the FSF’s proposal to set up colleges of supervisory authorities for the largest globally active institutions by the end of this year. In the  6  BIS Review 86/2008  EU, such informal institutional infrastructures of supervisors to support greater informationsharing and coordination in the supervision of cross-border groups are already in place. Our experience in Europe points to a number of elements that are crucial for ensuring the effective functioning of supervisory colleges, which may also be relevant for further developing the international arrangements in this field.