Legal provisions of COM(2009)499 - Community macro prudential oversight of the financial system and establishing a European Systemic Risk Board

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dossier COM(2009)499 - Community macro prudential oversight of the financial system and establishing a European Systemic Risk Board.
document COM(2009)499 EN
date November 24, 2010

Contents

CHAPTER I - GENERAL PROVISIONS


Article 1

Establishment

1. A European Systemic Risk Board (ESRB) is established. It shall have its seat in Frankfurt am Main.

2. The ESRB shall be part of the European System of Financial Supervision (ESFS), the purpose of which is to ensure the supervision of the Union’s financial system.

3. The ESFS shall comprise:

(a)the ESRB;

(b)the European Supervisory Authority (European Banking Authority) established by Regulation (EU) No 1093/2010;

(c)the European Supervisory Authority (European Insurance and Occupational Pensions Authority) established by Regulation (EU) No 1094/2010;

(d)the European Supervisory Authority (European Securities and Markets Authority) established by Regulation (EU) No 1095/2010;

(e)the Joint Committee of the European Supervisory Authorities (Joint Committee) provided for by Article 54 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010;

(f)the competent or supervisory authorities in the Member States as specified in the Union acts referred to in Article 1(2) of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010.

4. Pursuant to the principle of sincere cooperation in accordance with Article 4(3) of the Treaty on European Union, the parties to the ESFS shall cooperate with trust and full mutual respect, in particular to ensure that appropriate and reliable information flows between them.

Article 2

Definitions

For the purpose of this Regulation, the following definitions shall apply:

(a)‘financial institution’ means any undertaking that falls within the scope of the legislation referred to in Article 1(2) of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010, as well as any other undertaking or entity in the Union whose main business is of a similar nature;

(b)‘financial system’ means all financial institutions, markets, products and market infrastructures;

(c)‘systemic risk’ means a risk of disruption in the financial system with the potential to have serious negative consequences for the internal market and the real economy. All types of financial intermediaries, markets and infrastructure may be potentially systemically important to some degree.

Article 3

Mission, objectives and tasks

1. The ESRB shall be responsible for the macro-prudential oversight of the financial system within the Union in order to contribute to the prevention or mitigation of systemic risks to financial stability in the Union that arise from developments within the financial system and taking into account macroeconomic developments, so as to avoid periods of widespread financial distress. It shall contribute to the smooth functioning of the internal market and thereby ensure a sustainable contribution of the financial sector to economic growth.

2. For the purposes of paragraph 1, the ESRB shall carry out the following tasks:

(a)determining and/or collecting and analysing all the relevant and necessary information, for the purposes of achieving the objectives described in paragraph 1;

(b)identifying and prioritising systemic risks;

(c)issuing warnings where such systemic risks are deemed to be significant and, where appropriate, making those warnings public;

(d)issuing recommendations for remedial action in response to the risks identified and, where appropriate, making those recommendations public;

(e)when the ESRB determines that an emergency situation may arise pursuant to Article 18 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010 issuing a confidential warning addressed to the Council and providing the Council with an assessment of the situation, in order to enable the Council to assess the need to adopt a decision addressed to the ESAs determining the existence of an emergency situation;

(f)monitoring the follow-up to warnings and recommendations;

(g)cooperating closely with all the other parties to the ESFS; where appropriate, providing the ESAs with the information on systemic risks required for the performance of their tasks; and, in particular, in collaboration with the ESAs, developing a common set of quantitative and qualitative indicators (risk dashboard) to identify and measure systemic risk;

(h)participating, where appropriate, in the Joint Committee;

(i)coordinating its actions with those of international financial organisations, particularly the IMF and the FSB as well as the relevant bodies in third countries on matters related to macro-prudential oversight;

(j)carrying out other related tasks as specified in Union legislation.

CHAPTER II - ORGANISATION


Article 4

Structure

1. The ESRB shall have a General Board, a Steering Committee, a Secretariat, an Advisory Scientific Committee and an Advisory Technical Committee.

2. The General Board shall take the decisions necessary to ensure the performance of the tasks entrusted to the ESRB, pursuant to Article 3(2).

3. The Steering Committee shall assist in the decision-making process of the ESRB by preparing the meetings of the General Board, reviewing the documents to be discussed and monitoring the progress of the ESRB’s ongoing work.

4. The Secretariat shall be responsible for the day-to-day business of the ESRB. It shall provide high-quality analytical, statistical, administrative and logistical support to the ESRB under the direction of the Chair and the Steering Committee in accordance with Council Regulation (EU) No 1096/2010 (17). It shall also draw on technical advice from the ESAs, national central banks and national supervisors.

5. The Advisory Scientific Committee and the Advisory Technical Committee referred to in Articles 12 and 13 shall provide advice and assistance on issues relevant to the work of the ESRB.

Article 5

Chair and Vice-Chairs of the ESRB

1. The ESRB shall be chaired by the President of the ECB for a term of 5 years following the entry into force of this Regulation. For the subsequent terms, the Chair of the ESRB shall be designated in accordance with the modalities determined on the basis of the review provided for in Article 20.

2. The first Vice-Chair shall be elected by and from the members of the General Council of the ECB for a term of 5 years, with regard to the need for a balanced representation of Member States overall and between those whose currency is the euro and those whose currency is not the euro. The first Vice-Chair may be re-elected once.

3. The second Vice-Chair shall be the Chair of the Joint Committee as appointed pursuant to Article 55(3) of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010.

4. The Chair and the Vice-Chairs shall present to the European Parliament, during a public hearing, how they intend to discharge their duties under this Regulation.

5. The Chair shall preside at the meetings of the General Board and the Steering Committee.

6. The Vice-Chairs, in order of precedence, shall preside at the General Board and/or the Steering Committee when the Chair is unable to participate in a meeting.

7. If the term of office of a member of the General Council of the ECB elected as first Vice-Chair ends before the completion of the five-year term or if for any reason the first Vice-Chair is unable to discharge his duties, a new first Vice-Chair shall be elected in accordance with paragraph 2.

8. The Chair shall represent the ESRB externally.

Article 6

General Board

1. Members of the General Board with voting rights shall comprise:

(a)the President and the Vice-President of the ECB;

(b)the Governors of the national central banks;

(c)a Member of the Commission;

(d)the Chairperson of the European Supervisory Authority (European Banking Authority);

(e)the Chairperson of the European Supervisory Authority (European Insurance and Occupational Pensions Authority);

(f)the Chairperson of the European Supervisory Authority (European Securities and Markets Authority);

(g)the Chair and the two Vice-Chairs of the Advisory Scientific Committee;

(h)the Chair of the Advisory Technical Committee.

2. Members of the General Board without voting rights shall comprise:

(a)one high-level representative per Member State of the competent national supervisory authorities, in accordance with paragraph 3;

(b)the President of the Economic and Financial Committee (EFC).

3. With regard to the representation of the national supervisory authorities under paragraph 2(a), the respective high-level representatives shall rotate depending on the item discussed, unless the national supervisory authorities of a particular Member State have agreed on a common representative.

4. The General Board shall establish rules of procedure for the ESRB.

Article 7

Impartiality

1. When participating in the activities of the General Board and of the Steering Committee or when conducting any other activity relating to the ESRB, the members of the ESRB shall perform their duties impartially and solely in the interest of the Union as a whole. They shall not seek nor take instructions from the Member States, the Union institutions or any other public or private body.

2. No member of the General Board (whether voting or non-voting) shall have a function in the financial industry.

3. Neither the Member States, the Union institutions nor any other public or private body shall seek to influence the members of the ESRB in the performance of the tasks set out in Article 3(2).

Article 8

Professional secrecy

1. Members of the General Board and any other persons who work or who have worked for or in connection with the ESRB (including the relevant staff of central banks, the Advisory Scientific Committee, the Advisory Technical Committee, the ESAs and the Member States’ competent national supervisory authorities) shall not disclose information that is subject to professional secrecy, even after their duties have ceased.

2. Information received by members of the ESRB shall be used only in the course of their duties and in performing the tasks set out in Article 3(2).

3. Without prejudice to Article 16 and the application of criminal law, no confidential information received by the persons referred to in paragraph 1 whilst performing their duties shall be divulged to any person or authority whatsoever, except in summary or aggregate form, such that individual financial institutions cannot be identified.

4. The ESRB shall, together with the ESAs, agree on and establish specific confidentiality procedures in order to safeguard information regarding individual financial institutions and information from which individual financial institutions can be identified.

Article 9

Meetings of the General Board

1. Ordinary plenary meetings of the General Board shall be convened by the Chair of the ESRB and shall take place at least four times a year. Extraordinary meetings may be convened at the initiative of the Chair of the ESRB or at the request of at least one third of the members of the General Board with voting rights.

2. Each member shall be present in person at the meetings of the General Board and shall not be represented.

3. By way of derogation from paragraph 2, a member who is prevented from attending the meetings for a period of at least 3 months may appoint an alternate. That member may also be replaced by a person who has been formally appointed under the rules governing the institution concerned for the substitution of representatives on a temporary basis.

4. Where appropriate, high-level representatives from international financial organisations carrying out activities directly related to the tasks of the ESRB set out in Article 3(2) may be invited to attend the meetings of the General Board.

5. Participation in the work of the ESRB may be open to high-level representatives of the relevant authorities from third countries, in particular from EEA countries, strictly limited to issues of particular relevance to those countries. Arrangements may be made by the ESRB specifying, in particular, the nature, scope and procedural aspects of the involvement of those third countries in the work of the ESRB. Such arrangements may provide for representation, on an ad-hoc basis, as an observer, on the General Board and should concern only items of relevance to those countries, excluding any case where the situation of individual financial institutions or Member States may be discussed.

6. The proceedings of the meetings shall be confidential.

Article 10

Voting modalities of the General Board

1. Each member of the General Board with a voting right shall have one vote.

2. Without prejudice to the voting procedures set out in Article 18(1), the General Board shall act by a simple majority of members present with voting rights. In the event of a tie, the Chair of the ESRB shall have the casting vote.

3. By derogation from paragraph 2, a majority of two-thirds of the votes cast shall be required to adopt a recommendation or to make a warning or recommendation public.

4. A quorum of two-thirds of the members with voting rights shall be required for any vote to be taken by the General Board. If the quorum is not met, the Chair of the ESRB may convene an extraordinary meeting at which decisions may be taken with a quorum of one-third. The rules of procedure referred to in Article 6(4) shall provide for adequate notice for convening an extraordinary meeting.

Article 11

Steering Committee

1. The Steering Committee shall be composed of:

(a)the Chair and first Vice-Chair of the ESRB;

(b)the Vice-President of the ECB;

(c)four other members of the General Board who are also members of the General Council of the ECB, with regard to the need for a balanced representation of Member States overall and between those whose currency is the euro and those whose currency is not the euro. They shall be elected by and from among the members of the General Board who are also members of the General Council of the ECB, for a period of 3 years;

(d)a Member of the Commission;

(e)the Chairperson of the European Supervisory Authority (European Banking Authority);

(f)the Chairperson of the European Supervisory Authority (European Insurance and Occupational Pensions Authority);

(g)the Chairperson of the European Supervisory Authority (European Securities and Markets Authority);

(h)the President of the EFC;

(i)the Chair of the Advisory Scientific Committee; and

(j)the Chair of the Advisory Technical Committee.

Any vacancy for an elected member of the Steering Committee shall be filled by the election of a new member by the General Board.

2. Meetings of the Steering Committee shall be convened by the Chair of the ESRB at least quarterly, before each meeting of the General Board. The Chair of the ESRB may also convene ad-hoc meetings.

Article 12

Advisory Scientific Committee

1. The Advisory Scientific Committee shall be composed of the Chair of the Advisory Technical Committee and 15 experts representing a wide range of skills and experiences proposed by the Steering Committee and approved by the General Board for a four-year, renewable mandate. The nominees shall not be members of the ESAs and shall be chosen on the basis of their general competence and their diverse experience in academic fields or other sectors, in particular in small and medium-sized enterprises or trade-unions, or as providers or consumers of financial services.

2. The Chair and the two Vice-Chairs of the Advisory Scientific Committee shall be appointed by the General Board following a proposal from the Chair of the ESRB and they shall each have a high level of relevant expertise and knowledge, for example by virtue of their academic background in the sectors of banking, securities markets, or insurance and occupational pensions. The chairmanship of the Advisory Scientific Committee should rotate between those three persons.

3. The Advisory Scientific Committee shall provide advice and assistance to the ESRB in accordance with Article 4(5), at the request of the Chair of the ESRB.

4. The ESRB Secretariat shall support the work of the Advisory Scientific Committee and the head of the Secretariat shall participate in its meetings.

5. Where appropriate, the Advisory Scientific Committee shall organise consultations at an early stage with stakeholders such as market participants, consumer bodies and academic experts, in an open and transparent manner, while taking into account the requirement of confidentiality.

6. The Advisory Scientific Committee shall be provided with all necessary means in order to successfully complete its tasks.

Article 13

Advisory Technical Committee

1. The Advisory Technical Committee shall be composed of:

(a)a representative of each national central bank and a representative of the ECB;

(b)one representative per Member State of the competent national supervisory authorities, in accordance with the second subparagraph;

(c)a representative of the European Supervisory Authority (European Banking Authority);

(d)a representative of the European Supervisory Authority (European Insurance and Occupational Pensions Authority);

(e)a representative of the European Supervisory Authority (European Securities and Markets Authority);

(f)two representatives of the Commission;

(g)a representative of the EFC; and

(h)a representative of the Advisory Scientific Committee.

The supervisory authorities of each Member State shall choose one representative in the Advisory Technical Committee. With regard to the representation of national supervisory authorities under point (b) of the first subparagraph, the respective representatives shall rotate depending on the item discussed, unless the national supervisory authorities of a particular Member State have agreed on a common representative.

2. The Chair of the Advisory Technical Committee shall be appointed by the General Board following a proposal from the Chair of the ESRB.

3. The Advisory Technical Committee shall provide advice and assistance to the ESRB in accordance with Article 4(5) at the request of the Chair of the ESRB.

4. The ESRB Secretariat shall support the work of the Advisory Technical Committee and the head of the Secretariat shall participate in its meetings.

5. The Advisory Technical Committee shall be provided with all necessary means in order to successfully complete its tasks.

Article 14

Other sources of advice

In performing the tasks set out in Article 3(2), the ESRB shall, where appropriate, seek the views of relevant private sector stakeholders.

CHAPTER III - TASKS


Article 15

Collection and exchange of information

1. The ESRB shall provide the ESAs with the information on risks necessary for the achievement of their tasks.

2. The ESAs, the European System of Central Banks (ESCB), the Commission, the national supervisory authorities and national statistics authorities shall cooperate closely with the ESRB and shall provide it with all the information necessary for the fulfilment of its tasks in accordance with Union legislation.

3. Subject to Article 36(2) of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010, the ESRB may request information from the ESAs, as a rule in summary or aggregate form such that individual financial institutions cannot be identified.

4. Before requesting information in accordance with this Article, the ESRB shall first take account of the existing statistics produced, disseminated and developed by the European Statistical System and the ESCB.

5. If the requested information is not available or is not made available in a timely manner, the ESRB may request the information from the ESCB, the national supervisory authorities or the national statistics authorities. If the information remains unavailable, the ESRB may request it from the Member State concerned, without prejudice to the prerogatives conferred, respectively, on the Council, the Commission (Eurostat), the ECB, the Eurosystem and the ESCB in the field of statistics and data collection.

6. If the ESRB requests information that is not in summary or aggregate form, the reasoned request shall explain why data on the respective individual financial institution is deemed to be systemically relevant, and necessary, considering the prevailing market situation.

7. Before each request for information which is not in summary or aggregate form, the ESRB shall duly consult the relevant European Supervisory Authority in order to ensure that the request is justified and proportionate. If the relevant European Supervisory Authority does not consider the request to be justified and proportionate, it shall, without delay, send the request back to the ESRB and ask for additional justification. After the ESRB has provided the relevant European Supervisory Authority with such additional justification, the requested information shall be transmitted to the ESRB by the addressees of the request, provided that they have legal access to the relevant information.

Article 16

Warnings and recommendations

1. When significant risks to the achievement of the objective in Article 3(1) are identified, the ESRB shall provide warnings and, where appropriate, issue recommendations for remedial action, including, where appropriate, for legislative initiatives.

2. Warnings or recommendations issued by the ESRB in accordance with Article 3(2)(c) and (d) may be of either a general or a specific nature and shall be addressed in particular to the Union as a whole or to one or more Member States, or to one or more of the ESAs, or to one or more of the national supervisory authorities. If a warning or a recommendation is addressed to one or more of the national supervisory authorities, the Member State(s) concerned shall also be informed thereof. Recommendations shall include a specified timeline for the policy response. Recommendations may also be addressed to the Commission in respect of the relevant Union legislation.

3. At the same time as they are transmitted to the addressees in accordance with paragraph 2, the warnings or recommendations shall be transmitted, in accordance with strict rules of confidentiality, to the Council and the Commission and, where addressed to one or more national supervisory authorities, to the ESAs.

4. In order to enhance the awareness of risks in the economy of the Union and to prioritise such risks, the ESRB, in close cooperation with the other parties to the ESFS, shall elaborate a colour-coded system corresponding to situations of different risk levels.

Once the criteria for such classification have been elaborated, the ESRB’s warnings and recommendations shall indicate, on a case-by-case basis, and where appropriate, to which category the risk belongs.

Article 17

Follow-up of the ESRB recommendations

1. If a recommendation referred to in Article 3(2)(d) is addressed to the Commission, to one or more Member States, to one or more ESAs, or to one or more national supervisory authorities, the addressees shall communicate to the ESRB and to the Council the actions undertaken in response to the recommendation and shall provide adequate justification for any inaction. Where relevant, the ESRB shall, subject to strict rules of confidentiality, inform the ESAs without delay of the answers received.

2. If the ESRB decides that its recommendation has not been followed or that the addressees have failed to provide adequate justification for their inaction, it shall, subject to strict rules of confidentiality, inform the addressees, the Council and, where relevant, the European Supervisory Authority concerned.

3. If the ESRB has made a decision under paragraph 2 on a recommendation that has been made public following the procedure set out in Article 18(1), the European Parliament may invite the Chair of the ESRB to present that decision and the addressees may request to participate in an exchange of views.

Article 18

Public warnings and recommendations

1. The General Board shall decide on a case-by-case basis, after having informed the Council sufficiently in advance so that it is able to react, whether a warning or a recommendation should be made public. Notwithstanding Article 10(3), a quorum of two-thirds shall always apply to decisions taken by the General Board under this paragraph.

2. If the General Board decides to make a warning or recommendation public, it shall inform the addressees in advance.

3. The addressees of warnings and recommendations made public by the ESRB shall also be provided with the right of making public their views and reasoning in response thereto.

4. Where the General Board decides not to make a warning or a recommendation public, the addressees and, where appropriate, the Council and the ESAs shall take all the measures necessary for the protection of their confidential nature.

CHAPTER IV - FINAL PROVISIONS


Article 19

Accountability and reporting obligations

1. At least annually and more frequently in the event of widespread financial distress, the Chair of the ESRB shall be invited to an annual hearing in the European Parliament, marking the publication of the ESRB’s annual report to the European Parliament and the Council. That hearing shall be conducted separately from the monetary dialogue between the European Parliament and the President of the ECB.

2. The annual report referred to in paragraph 1 shall contain the information that the General Board decides to make public in accordance with Article 18. The annual report shall be made available to the public.

3. The ESRB shall also examine specific issues at the invitation of the European Parliament, the Council or the Commission.

4. The European Parliament may request the Chair of the ESRB to attend a hearing of the competent Committees of the European Parliament.

5. The Chair of the ESRB shall hold confidential oral discussions at least twice a year and more often if deemed appropriate, behind closed doors with the Chair and Vice-Chairs of the Economic and Monetary Affairs Committee of the European Parliament on the ongoing activity of the ESRB. An agreement shall be concluded between the European Parliament and the ESRB on the detailed modalities of organising those meetings, with a view to ensuring full confidentiality in accordance with Article 8. The ESRB shall provide a copy of that agreement to the Council.

Article 20

Review

By 17 December 2013, the European Parliament and the Council shall examine this Regulation on the basis of a report from the Commission and, after having received an opinion from the ECB and the ESAs, shall determine whether the mission and organisation of the ESRB need to be reviewed.

They shall, in particular, review the modalities for the designation or election of the Chair of the ESRB.

Article 21

Entry into force

This Regulation shall enter into force on the day following its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.