The European Commission’s unexpected decision to tear up phased implementation plans and start pushing through a new regulatory regime next month will likely cause years of turmoil, says PJ Di Giammarino, chief executive of think tankJWG-IT.

The de Larosière report on financial supervision and stability in the European Union recommended the phased implementation of a new supervisory regime. Following this, European Commission president, José Manuel Barroso, was advised that there be an 18-month preparatory period in which to upgrade the supervisors’ capabilities, establish clear funding and governance, and start the development of a consistent set of rules.

Unexpectedly, Mr Barroso has since said that he would like the new regulatory architecture up and running in 2010.

Under this new schedule, groundwork for the European Systemic Risk Council (ESRC) and a European System of Financial Supervisors (ESFS) will start in June. The regulatory overhaul also means that the current Lamfalussy level 3 committees – CEBS, CEIOPS and CESR - will be renamed and empowered to oversee and manage the current supervisory patchwork.  This ‘network of supervisors’ will be charged with managing development of binding standards and guidelines, supervisory practices, pan-EU controls such as credit rating agencies and central counter-party clearing houses, and crisis response efforts.

“What is shocking is the speed at which the Commission intends to standardise and centralise Europe’s financial services oversight works,” said Mr Di Giammarino.  “Europe has never had a common set of rules, laws, business practices or language for financial services, but now the EEA is sprinting to build them out with inadequate planning and resourcing.”

In Mr Di Giammarino’s view, this rushed regulatory overhaul will create confusion in an industry which - still reeling from the credit crisis – is struggling to cope with well-intentioned, but ill-informed decisions. Furthermore, the snap creation of a common rulebook is a gift to infrastructure providers who will rush to Brussels with their proprietary solutions, while a more measured approach would be wiser, he believes.

“As with any large technology project, a euro spent in design will save six euros to fix the problems once the system has been implemented,” he said.

The costs of recent regulatory requirements are already spiralling, Mr Di Giammarino points out: the UK’s liquidity risk reporting regime alone was recently estimated by the FSA to cost £2.4 billion– three times that of the Markets in Financial Instruments Directive.