Brussels - If you want to know how financial regulation legislation and accountancy reforms are shaping up in the EU, you need to glance back to the start of the century.

It was then that a major surge to bring together regulatory reform of financial markets among a disparate group of large and small European countries began under what was known as the Lamfalussy Program. Its target was to reduce the backlog in EU securities market regulation in order to compete in the integrated EU market by 2005.

However, a series of delays, coupled with the global financial meltdown, slowed that effort.

However, another and more recent reform proposal from former Banque de France governor Jacques de Larosière, with input from several others, calls for the establishment of a risk board and three central supervisory bodies to provide technical advice on banking, insurance and securities:

The European Systemic Risk Board would monitor and assess risks, provide early warnings and issue action recommendations.

A European System of Financial Supervisors would be charged with individual financial institutions and work jointly with a troika of newly created units - a European Banking Authority, a European Insurance and Occupational Pensions Authority and a European Securities and Markets Authority.

Assuming the proposal passes (which most observers deem likely), the agencies are scheduled to be operational sometime in 2010 and would have wide authority to resolve disagreements between national ministries spread across the EU's 27 member states.

Aside from the Lamfalussy Program, the EU has made progress with regard to adopting a single set of accounting and reporting standards throughout its member states - notably, the Markets in Financial Instruments Directive, which in 2007 upgraded consumer protection in investment services, and UCITS, the Undertaking for Collective Investment in Transferable Securities, as well as the Basel II directive. And earlier this year the European Parliament and Council of Ministers approved a Solvency II directive, which applies capital adequacy rules to the insurance sector.

Also on the reform docket is pending regulation for credit-rating agencies, but even if approved, that is not expected to be implemented before 2012.

At present, the EU is placing increased pressure on the issue of the capital reserves for banks.

In October, stress tests performed on the EU's top 22 banks (which were not named) showed that the institutions could survive credit losses up to U.S. $585 billion, running counter to U.S. reports that stated that European banks need more capital.

Meanwhile, in Brussels, several of the leading federations, including the Federation of European Accountants (FEE), BusinessEurope, the employer's federation, the European Banking Federation (FBE), the European Federation for Retirement Provision, and the European Private Equity & Venture Capital Association, have voiced both concerns and opposition to the pending legislative framework.

They expressed fear that the legislative upgrades would impact the availability of capital, which would harm European businesses.

Those groups, and in particular the bankers, are also opposed to IAS 39, the International Accounting Standards Board standard regulating accounting for financial instruments, including fair value measurements. FBE secretary-general Guido Ravoet said that any revisions should be studied for a time before "rushing to re-engineer IAS 39."

IASB Chairman Sir David Tweedie, meanwhile, recently told the British Parliament that IAS 39 changes will reduce the complexity of accounting for financial instruments.

Proponents of the massive legislative reform efforts include a newly formed group, Europeans for Financial Reform, whose Socialist Party leader, Poul Nyrup Rasmussen, is urging a quick adoption of the EU reform measures.

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