Explanatory Memorandum to COM(2009)576 - Amendment of Directives 1998/26/EC, 2002/87/EC, 2003/6/EC, 2003/41/EC, 2003/71/EC, 2004/39/EC, 2004/109/EC, 2005/60/EC, 2006/48/EC, 2006/49/EC, and 2009/65/EC in respect of the powers of the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2009)576 - Amendment of Directives 1998/26/EC, 2002/87/EC, 2003/6/EC, 2003/41/EC, 2003/71/EC, 2004/39/EC, 2004/109/EC, 2005/60/EC, ... |
|---|---|
| source | COM(2009)576  |
| date | 26-10-2009 |
Experience of the financial crisis has exposed important failures in financial supervision, both in particular cases and in relation to the financial system as a whole. President Barroso therefore requested a group of high level experts, chaired by Mr Jacques de Larosière, to make proposals to strengthen European supervisory arrangements, with the objective of establishing a more efficient, integrated and sustainable European system of supervision. The Group presented its report on 25 February 2009. Building on its recommendations, the Commission set out proposals for a new European financial supervisory architecture in its Communication to the Spring European Council of March 2009. The Commission presented its ideas in more detail in its Communication of May 2009 which proposed:
- Establishing a European System of Financial Supervisors (ESFS) , consisting of a network of national financial supervisors working in tandem with new European Supervisory Authorities (ESAs), created by transforming the existing European supervisory committees i into a European Banking Authority (EBA), a European Insurance and Occupational Pensions Authority (EIOPA), and a European Securities and Markets Authority (ESMA), thereby combining the advantages of an overarching European framework for financial supervision with the expertise of local micro-prudential supervisory bodies that are closest to the institutions operating in their jurisdictions; and
- Establishing a European Systemic Risk Board (ESRB), to monitor and assess potential threats to financial stability that arise from macro-economic developments and from developments within the financial system as a whole. To this end, the ESRB would provide an early warning of system-wide risks that may be building up and, where necessary, issue recommendations for action to deal with these risks.[2]
The Communication also concluded that in order for the ESFS to work effectively, changes to the financial services legislation would be necessary, in particular to provide an appropriate scope to the more general powers provided for in the individual regulations establishing the Authorities, ensuring a more harmonised set of financial rules through the possibility to develop draft technical standards and facilitate the sharing, where necessary, of micro-prudential information.
Two open consultations were conducted in the development of these proposals. Firstly, following the report of the high-level group chaired by Jacques de Larosière and the publication of the 4 March 2009 Commission Communication, the Commission organised a first consultation from 10 March to 10 April 2009 as input to its Communication on Financial Supervision in Europe published on 27 May 2009. A summary of the public submissions received can be found on:
ec.europa.eu/internal_market/consultations/docs
Secondly, from 27 May to 15 July 2009, the Commission organised another consultation round, inviting all interested parties to comment on the more detailed reforms presented in the Communication on Financial Supervision in Europe of 27 May 2009. The responses received were for the greater part supportive of the suggested reforms, with comments on detailed aspects of the proposed ESRB and ESFS. A summary of the public submissions received can be found on:
ec.europa.eu/internal_market/consultations/docs
Additionally, a Commission Services Staff Working Paper was published on 23 September 2009 to preview the possible areas where amendments to sectoral legislation may be necessary.
The May Commission Communication on Financial Supervision in Europe was accompanied by an impact assessment analysing the main policy options for establishing the ESFS and ESRB. A second impact assessment accompanies these proposals, examining the options in more detail. The second impact assessment analysed the options for the appropriate powers for the Authority to work towards achieving a single set of harmonised rules and concluded that this capacity would be rightly limited to those areas to be defined in forthcoming sectoral legislation, and identified such potential areas. Additionally, in developing the draft technical standards themselves, the Authorities should undertake appropriate analysis of potential related costs and benefits and consult stakeholders before submitting them to the Commission.
The second impact assessment report is available on the Commission website.
Contents
- LEGAL ELEMENTS OF THE PROPOSAL
- BUDGETARY IMPLICATIONS
- DETAILED EXPLANATION
- 2. CONSULTATION OF THE INTERESTED PARTIES
- 3. IMPACT ASSESSMENT
- OF THE PROPOSAL
- 6.1. Technical Standards
- 6.2. Settlement of disagreements between national supervisory authorities
- 6.3. General amendments
- To discharge the current tasks of the present Level 3 Committees
- Cooperation obligations and information sharing with the ESAs
- International and advisory role
- List keeping and other amendments
Given that changes need to be introduced into existing Directives to ensure the development of a single rule book, an amending Directive is the most appropriate instrument. This amending Directive should have the same legal basis as the Directives it amends.
The proposal has no implication for the Community budget.
On 23 September 2009, the Commission adopted proposals for a Regulation establishing a European Banking Authority, a Regulation establishing a European Insurance and Occupational Pensions Authority, and a Regulation establishing a European Securities and Markets Authority.[3] Along with those Regulations and in order for the ESFS to work effectively, changes to the sectoral legislation are necessary. The areas in which amendments are proposed fall broadly into the following categories:
- Definition of the appropriate scope of technical standards as an additional tool for supervisory convergence and with a view of developing a single rule book;
- To appropriately integrate the possibility for the authority to settle disagreements in a balanced way to those areas where common decision making processes already exist in sectoral legislation; and
- General amendments which are common to most sectoral legislation and necessary for the directives to operate in the context of new authorities for example, renaming the level 3 committees to the new authorities and ensuring the appropriate gateways for the exchange of information are present.
This amending directive is proposed to amend the following legislation:
- 2006/48/EC and 2006/49/EC: Capital Requirements Directive
- 2002/87/EC: Financial Conglomerates Directive
- 2003/41/EC: Institutions for Occupational Retirement Provisions Directive
- 2003/6/EC: Market Abuse Directive
- 2004/39/EC: Markets in Financial Instruments Directive
- 2003/71/EC: Prospectus Directive
- 1998/26/EC: Settlement Finality Directive
- 2004/109/EC: Transparency Directive
- 2005/60/EC: Anti Money-Laundering Directive
- 2009/65/EC: Undertakings for Collective Investments in Transferable Securities
Moreover, where appropriate, the Commission will make further proposals for amendments to the Solvency II Directive, which is currently being finalised, after publication of the Directive.
The proposals for a Regulation establishing a European Banking Authority, a Regulation establishing a European Insurance and Occupational Pensions Authority and a Regulation establishing a European Securities and Markets Authority adopted by the Commission on 23 September 2009 provide that the Authorities may develop draft technical standards in the areas specified in sectoral legislation. The identification of areas for technical standards is based on the following high level principles:
- Technical issues: those areas selected are genuinely technical, where the development of standards is best left to supervisory experts. They are areas which do not involve policy decisions.
- Practical issues/cooperation procedures: relate to practical issues like procedural approaches to information exchange which could enhance cooperation between supervisory authorities, and which are of a direct concern to the authorities involved. These areas should only include such issues where a common approach or predictability would be of benefit to all concerned.
- Flexibility: where it is important to have technical flexibility to respond rapidly to future market developments or where in some areas it is not necessary to make changes now but to have the option to do so if necessary at a later date.
- Necessity: Only those areas where detailed, technical and consistent rules are needed for financial stability, depositor, policy holder and investor protection, to ensure market efficiency and integrity or to strengthen the single market have been selected.
In practice, the types of areas covered by technical standards fall into three categories. Firstly, standards may be developed in those areas where detailed methodological or quantitative standards are required to ensure consistent application of certain rules and where there is generally less need for supervisory judgement. Secondly, in those areas that would benefit from a uniform approach to reporting or disclosure for example in facilitating work towards a uniform reporting format in banking by 2012. Finally, in those areas where supervisors would benefit from a consistent approach to cooperation processes including in terms of supervisory risk assessment and information sharing for example in situations where host supervisors of branches would benefit from a consistent minimum set of information from home supervisors.
In addition to the areas identified in this Directive, the Commission is considering further whether additional empowerments for technical standards should be made in some areas – in particular securities - which are covered by level 2 rules, which have been adopted on the basis of an empowerment to the Commission given under the Level 1 instruments, to determine the conditions of application those rules without supplementing the level 1 and 2 instruments concerned. These further amendments would concern in particular Directives 2003/6/EC, 2003/71/EC and 2004/39/EC and could form a second Omnibus Directive, along with proposals for amendments to the Solvency II Directive.
In the regulations setting up the European Supervisory Authorities, a mechanism is proposed to ensure that relevant national supervisory authorities take due account of the interests of other Member States as well as the soundness and stability of the European system as a whole.
In general, disagreements between supervisors are fully covered by the regulation with no consequential changes to the sectoral legislation required. However, in those areas where there is already some form of non-binding mediation process possible, or where there are time limits for joint decisions to be taken by one or more supervisors, amendments will be needed to incorporate in an appropriate way the possibility for the authorities to settle disagreements. Such amendments should have the objective to ensure there is clarity over and minimum disruption to the process for reaching a joint decision, but also that, where necessary, the Authorities are able to resolve disagreements.
There are a number of areas where consequential amendments which are common to most sectoral legislation and necessary for the directives to operate in the context of new authorities should be made, outlined below.
In order to ensure that the new Authorities can continue to undertake the current tasks of the level 3 Committees smoothly, i n all of the directives listed above, the following references will be renamed to:
'Committee of European Banking Supervisors' with European Banking Authority
'Committee of European Insurance and Occupational Pensions Supervisors' with European Insurance and Occupational Pensions Authority
'Committee of European Securities Regulators' with European Securities and Markets Authority
The new supervisory architecture will require national supervisory authorities to cooperate closely with the European Supervisory Authorities. In particular, they should receive sufficient information from the national supervisory authorities in order to be able to discharge their duties under the regulation.
Where necessary, specific information sharing requirements to facilitate the above will be set out in sectoral legislation. Amendments to the relevant legislation clarify the obligations on national supervisors to provide the necessary information for the discharge of the tasks of the authorities and appropriate information gateways to ensure there are no legal obstacles to the information sharing obligations included in the Regulations establishing the Authorities.
The ESAs could serve as helpful contact points for supervisory authorities from third countries. In this context, they may, without prejudice to the competences of the European Institutions, enter into administrative arrangements with international organisations and the administrations of third countries. The ESAs may also assist in preparing equivalence decisions pertaining to supervisory regimes in third countries. Moreover, the ESAs may, upon request or on their own initiative, provide advice to the European Parliament, the Council and the Commission or publish opinions, including with respect to the prudential assessments of cross-border mergers and acquisitions. The latter should provide for additional safeguards to ensure a sound and objective assessment of future cross-border mergers or acquisitions.
It is proposed that the ESAs will be given the duty to establish, publish and regularly update registers and lists of financial actors in the Community and other important issues, which is currently the duty of each national competent authority, e.g. to keep the register of all investment firms according to Art 5 (3) MiFID or the list of regulated markets according to Art 47 MiFID. Having one consolidated list or register for each category of financial actors in the Community may improve transparency and better reflects the single financial market