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The review of the mandate, governance and operations of the ESAs must take into account developments which have taken place over the past six years. These include, in particular, the establishment of the banking union and progress made towards building a capital markets union (CMU). The ESAs were reviewed in 2014 prior to the establishment of the Single Supervisory Mechanism (SSM), which warrants due recognition within the ESAs’ legislative framework. This review also falls during the period leading up to the withdrawal of the UK from the EU.
The ECB supports the objective of fostering effective and consistent prudential supervision and regulation across Europe. The continued integration of financial institutions, markets and infrastructures requires further convergence in order to contribute to the efficient functioning of the Economic and Monetary Union. In this regard, Level 3 instruments, such as guidelines and recommendations issued by the ESAs, have proven to be particularly useful and effective in increasing supervisory convergence. Supervisory colleges also enhance this convergence by promoting consistency and cooperation in the operationalisation of EU legislation by the competent authorities (CAs) at the national level.
The ECB supports further integration of the supervisory framework at the EU level, both for banking and for the capital markets. In this context, the aim of the review should be to strengthen the EU dimension of supervision.
The ECB reiterates that a strong CMU will, in the long run, require the creation of a single capital markets supervisor. Although the establishment of the European Securities and Markets Authority (ESMA) was a major step in fostering the convergence of national supervisory practices, the supervision of securities markets still occurs at the national level, fragmenting the application of EU legislation and keeping EU capital markets segmented. Efficient supervision also requires promoting and implementing greater standardisation of the information provided to the authorities and markets, including loan information. This also has the benefit of increasing market transparency in the context of the CMU.
The ECB supports the Commission’s move towards more integrated supervision for certain segments of the capital markets and towards a greater role for the central bank of issue. A European approach is justified when major financial market infrastructures have systemic implications for the entire EU market. In this matter, the ECB welcomes the call to strengthen the role of the central bank of issue put forward in the recent European Commission proposal for amending the European Market Infrastructure Regulation (EMIR), published on 13 June. The ECB stands ready to cooperate with the Commission within its areas of expertise. Furthermore, an extension of ESMA’s powers to pan-European investment fund schemes could pave the way towards further deepening the Single Market in this area. ESMA’s powers could also be extended to include market conduct competencies and tools.
The ECB also reiterates its call for strengthened macroprudential supervision for capital markets and extending the macroprudential toolkit for non-banking activities. With the establishment of the CMU, and in the light of new emerging systemic risks in the non-banking sector, the EU legislation available to the relevant national and EU authorities should address such instruments. It is particularly important for European entities and activities, such as insurance and securities markets, to ensure homogenous enforcement across the EU. The discussion of financial stability issues in the non-banking sector warrants the involvement of central banks, given their expertise in assessing systemic risk, and requires changes in the competencies and governance of ESMA and the European Insurance and Occupational Pensions Authority (EIOPA).
The ECB supports a review of the governance structure of the ESAs, including a review of the voting rights and membership structure of the Boards, to ensure that the European dimension is fully reflected in their decision-making. Granting the ECB, in parallel to the other competent authorities (CA), voting member status on the Board of Supervisors of the European Banking Authority (EBA) and permanent membership and voting status on the Management Board would complement the national expertise of the national competent authorities (NCAs) and thus strengthen the European perspective in the governance of the EBA. Careful consideration must be given to ensuring that an appropriate balance is maintained between countries that are members of the banking union and those that are not. The ECB should also underpin its observer status on the Board of Supervisors in its capacity as central bank.
Based on ESMA’s current competencies and tasks within the existing institutional framework, the ECB also supports a review of the composition of the ESMA Board of Supervisors, granting the ECB observer status. Furthermore, the Management Boards should be given a stronger operational role, increasing the effectiveness of the ESAs and allowing the Boards of Supervisors to focus on strategic issues