21 March 2019

Financial supervision: Council presidency and Parliament reach provisional deal on supervisory framework for European financial institutions

The Romanian Presidency of the Council and the European Parliament reached a provisional agreement on a set of proposals to review the functioning of the current European system of financial supervision (ESFS). The deal will now need to be confirmed by EU ambassadors.

The European system of financial supervision was established in 2011 and consists of:

• three European supervisory authorities (ESAs): the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA).
• the European Systemic Risk Board (ESRB) which oversees the financial system as a whole and coordinates EU policies for financial stability.

Following the financial crisis, the EU overhauled its financial system, including how it is regulated and overseen. It introduced a single rulebook, i.e. a set of regulations agreed at EU level and directly applicable in all EU member states and created the ESAs. These authorities play a key role in ensuring that the financial markets across the EU are well regulated, strong and stable. They contribute to the development and consistent application of the single rulebook, solve cross-border problems, and thereby promote both regulatory and supervisory convergence.

The Presidency and the Parliament agreed on the first fundamental review of the tasks, powers, governance and funding of the ESAs and the ESRB, so as to adapt the authorities to the changed context in which they operate. The reform also includes provisions reinforcing the role of the EBA as regards risks posed to the financial sector by money laundering and terrorist financing activities.

The agreed text improves the existing system for supervisory convergence in order to make the process more efficient, coherent and transparent. It builds on existing tools, such as peer reviews, guidelines, Q&A while introducing new ones, for example the establishment of coordination groups at EU level.

The agreement also reviews the ESAs' governance structure. The reform also reviews the powers of each of the three ESAs. Finally, the reform strengthens the role and powers of the EBA as regards anti-money laundering supervision.

Press release

European Commission reaction: Capital Markets Union: Political agreement on a stronger and more integrated European supervisory architecture, including on anti-money laundering

ALFI reaction

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