Internal Market Commissioner Michel Barnier has described the establishment of three new watchdogs for banks, markets and the insurance sector as a "turning point" in financial supervision. The three EU-level authorities officially began work on 1 January after the Parliament and Council hammered out a compromise on their powers last September. "These new structures are the control tower and the radar screens that the financial sector needs," he said.

The three authorities will work in close cooperation with a fourth body, the European Systemic Risk Board, which came into being on 16 December 2010. The ESRB operates under the auspices of the European Central Bank - which provides its Secretariat and president - and will be responsible for monitoring the build-up of risks in the EU as a whole, for example issuing warnings on potential house price bubbles. However, it will have no clout beyond naming and shaming countries that fail to adhere to its warnings. The General Board of the ESRB will hold its first meeting on 20 January.

The event marks a change in the way banks and other financial institutions will conduct their business, with the three supervisory authorities responsible for drawing up common reporting standards and ensuring companies apply EU law in the same way across the bloc. The agencies will be given unprecedented powers to intervene in national markets, including addressing decisions to individual banks if a future emergency is declared, where national regulators fail to enforce the rules or where there is a dispute between authorities...

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