The legislative proposals recently adopted by the Commission address weaknesses both at the macro- and micro-prudential supervision levels. They will create a new European Systemic Risk Board (ESRB) to detect risks to the financial system as a whole.
Today's legislative proposals address those weaknesses both at the macro- and micro-prudential supervision levels by creating:
· a European Systemic Risk Board (ESRB) to monitor and assess risks to the stability of the financial system as a whole ("macro-prudential supervision"). The ESRB will provide early warning of systemic risks that may be building up and, where necessary, recommendations for action to deal with these risks.
· a European System of Financial Supervisors (ESFS) for the supervision of individual financial institutions ("micro-prudential supervision"), consisting of a network of national financial supervisors working in tandem with new European Supervisory Authorities, created by the transformation of existing Committees for the banking securities and insurance and occupational pensions sectors. There will be a European Banking Authority (EBA), a European Insurance and Occupational Pensions Authority (EIOPA) and a European Securities and Markets Authority (ESMA).
The ESRB will have the power to issue recommendations and warnings to Member States (including the national supervisors) and to the European Supervisory Authorities, which will have to comply or else explain why they have not done so. The heads of the ECB, national central banks, the European Supervisory Authorities and national supervisors will participate in the ESRB. The creation of the ESRB is in line with several initiatives at multilateral level or outside the EU, including the creation of a Financial Stability Board by the G20.
Regarding micro-prudential supervision, currently there are three financial services committees for micro-financial supervision (supervision of individual financial institutions) at EU level, with advisory powers only: the Committee of European Banking Supervisors (CEBS), Committee of European Insurance and Occupational Pensions Committee (CEIOPS) and the Committee of European Securities Regulators (CESR).
The new Authorities will take over all of the functions of those committees and, in addition, have certain extra competences, including the following:
· The ability to develop proposals for technical standards, respecting better regulation principles;
· The ability to resolve cases of disagreement between national supervisors, where legislation requires them to co-operate or to agree;
· The power to contribute to ensuring consistent application of technical Community rules (including through peer reviews);
· The European Securities and Markets Authority will exercise direct supervisory powers for Credit Rating Agencies;
· A coordination role in emergency situations.
Proposal for a regulation on Community macro prudential oversight of the financial system and establishing a European Systemic Risk Board (ESRB)
Proposal for a decision entrusting the European Central Bank with specific tasks concerning the functioning of the European Systemic Risk Board
Proposal for a regulation establishing a European Banking Authority (EBA)
Proposal for a regulation establishing a European Insurance and Occupational Pensions Authority (EIOPA)
Proposal for a regulation establishing a European Securities and Markets Authority (ESMA)
© European Commission
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