The objective of the present work is to sketch a proposal for the re-organisation of regulatory arrangements and supervisory agencies in the European financial markets. This proposal is formulated in light of the evolution of the role of intermediaries and aims at speeding the ongoing process of integration of financial markets in the Euro area. It is based on previous experiences in the matter of financial regulation at both national and international level.
We start by reviewing objectives and theoretical models for the regulation of financial systems. We then move to highlight some features of financial market regulation in Italy that we consider somehow problematic as a consequence of the recent evolution in the financial intermediaries, instruments and markets. A proposal is then formulated for a new configuration for supervising the domestic financial market through the assignment of different objectives or "finalities" to different authorities. This perspective would thus entrust the three objectives of supervision -- stability, transparency and proper behaviour, competition -- to three distinct authorities designed to oversee the entire financial market regardless of the subjective nature of the intermediaries.
We think that our proposal could be transferred (with some benefit) to the Euro area. This requires to explicitly address what is probably the weakest point and the more evident problem of the European Union construction, that of who takes care of financial stability. In particular, one has to re-examine the issue of the need for a lender of last resort and of the proper relationship of the European Central Bank with other financial market regulators. We propose to establish a European System of Financial Supervisors, with three distinct independent authorities (plus the ECB) at the European level. They will provide incentives for and co-ordinate the work of the three corresponding national authorities in each member country.
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