The future of financial supervision for integrated European markets: is the architecture fit for purpose?

Deeper and more efficient EU capital markets capable of supporting investment, innovation and growth require a stronger EU dimension in financial supervision and greater supervisory convergence.

Since the Global Financial Crisis, the EU supervisory framework has evolved incrementally through successive additions of institutions and mandates. Over the same period, the financial system, characterised by growing non-bank financial intermediation and deepening cross-sector interconnections, has evolved beyond traditional sectoral boundaries.

Amid deeper EU supervisory integration and a renewed focus on competitiveness and simplification, these developments raise a broader question: is the current supervisory architecture best suited to support an integrated, competitive and resilient EU financial system?

To explore this question, this paper maps the composition and structure of the EU supervisory architecture. It discusses simplification through better institutional design and suggests that an objectives-based architecture – such as the Four Peaks model, organised around financial stability, prudential soundness, investor protection and competition – may provide a useful direction for the future of EU financial supervision.

Carmine Di Noia is Director for Financial and Enterprise Affairs at the OECD and Albert Guarner Piquet is Counsellor in the Directorate for Financial and Enterprise Affairs at the OECD.