Following the financial crisis and the recommendations of a group of high-level experts led by Jacques de Larosière, the Union has made important progress in creating not only stronger, but also more harmonised rules for the financial markets in the form of the Single Rulebook. The Union has also set up the European system of financial supervision (ESFS), built on a two-pillar system which combines micro-prudential supervision, coordinated by the European Supervisory Authorities (ESAs), and macro-prudential supervision through the establishment of the European Systemic Risk Board (ESRB). The three ESAs, namely the European Supervisory Authority (European Banking Authority) (EBA) established by Regulation (EU) No 1093/2010 of the European Parliament and of the Council (4), the European Supervisory Authority (European Insurance and Occupational Pensions Authority) (EIOPA) established by Regulation (EU) No 1094/2010 of the European Parliament and of the Council (5), and the European Supervisory Authority (European Securities and Markets Authority) (ESMA) established by Regulation (EU) No 1095/2010 of the European Parliament and of the Council (6) (collectively the ‘founding regulations’), became operational in January 2011. The overall objective of the ESAs is to sustainably reinforce the stability and effectiveness of the financial system throughout the Union and to enhance consumer and investor protection.
(2)
The ESAs have made a crucial contribution to the harmonisation of the rules of the financial markets in the Union by providing the Commission with input for its initiatives for regulations and directives adopted by the European Parliament and by the Council. The ESAs have also provided the Commission with drafts of detailed technical rules which have been adopted as delegated and implementing acts.
(3)
The ESAs have also contributed to the convergence in financial supervision and supervisory practices in the Union by means of guidelines directed at competent authorities, financial institutions or financial market participants and by coordinating reviews of supervisory practices.
(4)
Enhanced powers afforded to the ESAs, to enable them to meet their objective, would also require appropriate governance, an efficient use of resources and sufficient funding. Enhanced powers alone would not be sufficient to achieve the ESAs’ objectives where they do not have sufficient funding or where they are not governed in an effective and efficient manner.
(5)
When performing their tasks and exercising their powers, the ESAs should act in accordance with the principle of proportionality laid down in Article 5 of the Treaty on European Union (TEU), as well as with the better regulation policy. The content and form of the ESAs’ actions and measures including instruments such as guidelines, recommendations, opinions or questions and answers should always be based on and within the boundaries of the legislative acts referred to in Article 1(2) of the founding regulations or within the scope of their powers. The ESAs should not exceed what is necessary to achieve the objectives of this Regulation and should act proportionately to the nature, scale and complexity of the risks inherent in the financial activity or business of the affected financial institution or undertaking.
(6)
In its Communication of 8 June 2017 on the mid-term review of the Capital Markets Union Action Plan, the Commission emphasised that more effective and consistent supervision of financial markets and services is pivotal for the elimination of regulatory arbitrage between Member States in the exercise of their supervisory tasks, in order to accelerate market integration and to create internal market opportunities for financial entities and investors.
(7)
Further progress in supervisory convergence is therefore particularly urgent to complete the capital markets union. Ten years after the onset of the financial crisis and the establishment of the new supervisory system, financial services and the capital markets union will be increasingly driven by two major developments: sustainable finance and technological innovation. Both have the potential to transform financial services and our system of financial supervision should be equipped for them. It is therefore crucial that the financial system plays its full part in meeting critical sustainability challenges. This will require active contribution by the ESAs to create the appropriate regulatory and supervisory framework.
(8)
The ESAs should play an important role in identifying and reporting risks that environmental, social and governance related factors pose to financial stability, and in rendering financial markets activity more consistent with sustainability objectives. The ESAs should provide guidance on how sustainability considerations can be effectively embodied in relevant Union financial legislation and promote coherent implementation of those provisions upon adoption. When initiating and coordinating Union-wide assessments of the resilience of financial institutions to adverse market developments, the ESAs should duly consider risks that environmental, social and governance related factors could pose to the financial stability of those institutions.
(9)
Technological innovation has had an increasing impact on the financial sector and competent authorities have therefore taken various initiatives to deal with those technological developments. In order to continue promoting supervisory convergence and to exchange best practices between relevant authorities on the one hand, and between relevant authorities and financial institutions or financial market participants on the other hand, the role of the ESAs with regard to their oversight function and supervisory coordination should be strengthened.
(10)
Technological advancements in financial markets can improve financial inclusion, provide access to finance, enhance market integrity and operational efficiency and also lower barriers to entry in those markets. To the extent relevant for the applicable substantive rules, training of competent authorities should also extend to technological innovation. This should help prevent Member States developing divergent approaches in those matters.
(11)
EBA should, in its area of expertise, monitor the obstacles to or impact on prudential consolidation and could provide opinions or recommendations with the aim of identifying appropriate ways to address such obstacles or impact.
(12)
Questions and answers are an important convergence tool that promote common supervisory approaches and practices by giving guidance on the application of Union legal acts within the scope of the ESAs.
(13)
It is becoming increasingly important to promote consistent, systematic and effective monitoring and assessment of risks in relation to money laundering and terrorist financing in the Union’s financial system. The prevention and countering of money laundering and of terrorist financing is a shared responsibility of Member States and Union institutions and bodies, within their respective mandates. They should establish mechanisms for enhanced cooperation, coordination and mutual assistance, fully utilising all the tools and measures available under the existing regulatory and institutional framework.
(14)
Given the consequences for financial stability which may stem from abuses of the financial sector for money laundering or terrorist financing purposes, considering that it is in the banking sector that money laundering and terrorist financing risks are most likely to have systemic impact, and building on the experience already gained by EBA, which is an authority where the national competent authorities of all Member States are represented, in protecting the banking sector from such abuses, EBA should take a leading, coordinating and monitoring role at Union level to prevent the use of the financial system for such purposes. Therefore, it is necessary to entrust EBA, in addition to its current competences, with the power to act within the scope of Regulations (EU) No 1094/2010 and (EU) No 1095/2010 insofar as such power relates to the prevention and countering of money laundering or of terrorist financing where it concerns financial sector operators and the competent authorities supervising them, which are covered by those Regulations. Moreover, concentrating that mandate for the entire financial sector within EBA would optimise the use of its expertise and resources, and would be without prejudice to the material obligations laid down in Directive (EU) 2015/849 of the European Parliament and of the Council (7).
(15)
In order for EBA to exercise its mandate effectively, it should make full use of all its powers and tools under Regulation (EU) No 1093/2010 while respecting the principle of proportionality. For that purpose, it should develop regulatory and supervisory standards, in particular by developing draft regulatory technical standards, draft implementing technical standards, guidelines and recommendations, and providing opinions for preventing and countering money laundering and terrorist financing in the financial sector and promoting their consistent implementation in line with the mandate provided for in the relevant legislative acts referred to in Article 1(2) and Article 16 of the founding regulations. The measures that EBA adopts to promote integrity, transparency and security in the financial system and to prevent and counter money laundering and terrorist financing should not exceed what is necessary to achieve the objectives of this Regulation or of the legislative acts referred to in Article 1(2) of the founding regulations and should take duly into account the nature, scale and complexity of risks, business practices, business models and the size of financial sector operators and of markets.
(16)
In line with its new role, it is important that EBA collects all relevant information on weaknesses in relation to money laundering and terrorist financing activities identified by the relevant Union and national authorities, without prejudice to the tasks assigned to authorities under Directive (EU) 2015/849 and without any unnecessary duplication. In accordance with Regulation (EU) 2018/1725 of the European Parliament and of the Council (8), EBA should store such information in a centralised database and foster cooperation among authorities by ensuring appropriate dissemination of relevant information. EBA should therefore be mandated to develop draft regulatory technical standards regarding the collection of information. EBA may also, where appropriate, transmit evidence in its possession which could give rise to criminal proceedings to the national judicial authorities of the Member State concerned and, to the extent it concerns Member States participating in enhanced cooperation on the establishment of the European Public Prosecutor’s Office under Council Regulation (EU) 2017/1939 (9), to the European Public Prosecutor’s Office, for those explicitly conferred tasks.
(17)
EBA should not collect information on concrete suspicious transactions which financial sector operators are obliged to report to EU Financial Intelligence Units in their Member States pursuant to Directive (EU) 2015/849. Weaknesses should be considered material where they constitute a breach or a potential breach by a financial sector operator, or constitute inappropriate or ineffective application by a financial sector operator, or inappropriate or ineffective application by a financial sector operator of its internal policies and procedures to comply with the legal provisions related to the prevention of the use of the financial system for the purpose of money laundering or terrorist financing. A breach is considered to have occurred where a financial sector operator fails to comply with the requirements of any Union act and of national law transposing such requirements referred to in Article 1(2) of the founding regulations to the extent that those acts contribute to the prevention of the use of the financial system for the purpose of money laundering or terrorist financing. A potential breach is where the competent authority has reasonable grounds to suspect that a breach has occurred, but at that stage is not in a position to finally conclude that it has occurred. However, due to the information obtained at that stage such as information from on-site inspections or off-site proceedings, it is very likely that a breach has occurred. Inappropriate or ineffective application of legal provisions is constituted by the failure of a financial sector operator to implement the requirements of those acts in a satisfactory manner. Inappropriate or ineffective application of a financial sector operator’s internal policies and procedures aiming at ensuring compliance with those acts should be considered as constituting a weakness substantially raising the risk that breaches have occurred or can occur.
(18)
When assessing vulnerabilities to and risks of money laundering and terrorist financing in the financial sector, EBA should also consider the implications for money laundering and terrorist financing from all predicate offences, including those that are tax crimes, where applicable.
(19)
Upon request, EBA should provide assistance to competent authorities in the exercise of their prudential supervisory functions. EBA should also coordinate closely, and, where appropriate, exchange information, with competent authorities including the European Central Bank, in its supervisory capacity, and with authorities entrusted with supervising obliged entities listed in points (1) and (2) of Article 2(1) of Directive (EU) 2015/849 to ensure efficiency and to avoid any form of duplicative or inconsistent actions in the prevention and countering of money laundering or of terrorist financing.
(20)
EBA should carry out peer reviews of competent authorities, as well as risk assessments on the appropriateness of the strategies and resources of competent authorities with a view to the most important emerging money laundering and terrorist financing risks as identified in the Supranational Risk Assessment. When conducting such peer reviews in accordance with Article 30 of Regulation (EU) No 1093/2010, EBA should take into account relevant evaluations, assessments or reports drawn up by international organisations and intergovernmental bodies with competence in the field of preventing and countering money laundering or terrorist financing as well as the biannual Report of the Commission under Article 6 of Directive (EU) 2015/849 and the National Risk Assessment of the relevant Member State prepared under Article 7 of that Directive.
(21)
Furthermore, EBA should have a leading role in contributing to facilitating cooperation between competent authorities in the Union and the relevant authorities in third countries on those matters with a view to better coordinate action at Union level in material cases of money laundering and terrorist financing having a cross-border and third-country dimension. Such role should be without prejudice to regular interactions by competent authorities with third-country authorities.
(22)
In order to enhance the effectiveness of supervisory control of compliance in the area of money laundering and terrorist financing and to ensure greater coordination of the enforcement by national competent authorities of breaches of directly applicable Union law or its national transposing measures, EBA should have the power to carry out analysis of the information collected and, if necessary, pursue investigations on allegations brought to its attention concerning material breaches or non-application of Union law, and, where there are indications of material breaches, to request competent authorities to investigate any possible breaches of the relevant rules, to consider taking decisions and imposing sanctions addressed to financial sector operators requiring them to comply with their legal obligations. That power should only be used where EBA has indications of material breaches.
(23)
For the purposes of the procedure for breach of Union law provided for in Article 17 of the founding regulations and in the interest of proper application of Union law, it is appropriate to ease, and speed up, the ESAs’ access to information. They should therefore be enabled to request information directly, via a duly justified and reasoned request, from other competent authorities whenever requesting information from the competent authority concerned has proven, or is deemed to be, insufficient to obtain the information that is deemed necessary for the purpose of investigating an alleged breach or non-application of Union law.
(24)
Harmonised supervision of the financial sector requires a consistent approach among competent authorities. To that end, the activities of the competent authorities are subject to peer reviews. The ESAs should also ensure that the methodology is applied in the same manner. Such peer reviews should not only focus on the convergence of supervisory practices, but also on the capacity of competent authorities to achieve high-quality supervisory outcomes, as well as on the independence of those competent authorities. The main findings of those peer reviews should be published to encourage compliance and increase transparency, unless such publication would involve risks to financial stability.
(25)
In view of the importance of ensuring that the Union supervisory framework for the prevention and countering of money laundering and of terrorist financing is applied effectively, peer reviews to provide objective and transparent perspectives on supervisory practices are of paramount importance. EBA should also assess the strategies, capacities and resources of the competent authorities to address emerging risks related to money laundering and terrorist financing.
(26)
For carrying out its tasks and exercising its powers for the prevention and countering of money laundering and of terrorist financing, it should be possible for EBA to take individual decisions addressed to financial sector operators in accordance with the procedure for breach of Union law and of the procedure of binding mediation even when the substantive rules are not directly applicable to financial sector operators, after having taken a decision addressed to the competent authority. Where the substantive rules are laid down in Directives, EBA should apply national law to the extent it is transposing those Directives. Where the relevant Union law is composed of Regulations and where, on the date of entry into force of this Regulation, those Regulations expressly grant options to Member States, EBA should apply national law to the extent that such options have been exercised.
(27)
Where this Regulation authorises EBA to apply national law transposing Directives, such national law can be applied by EBA only to the extent necessary for carrying out the tasks conferred on it by Union law. Therefore, EBA should apply all the relevant Union rules, and where such rules are laid down in Directives, it should apply national law transposing those Directives to the extent required by Union law, aiming at an even application of law throughout the Union while respecting the relevant national law.
(28)
Where a decision of EBA is based on, or connected with, its powers for the prevention and countering of money laundering and of terrorist financing and concerns financial sector operators or competent authorities within the remit of EIOPA or ESMA, EBA should only be able to take the decision in agreement with EIOPA or ESMA, respectively. EIOPA and ESMA, in each case taking into account the urgency of the relevant decision, should, when expressing their views, consider making use of expedited decision procedures in line with their respective internal governance rules.
(29)
The ESAs should have in place dedicated reporting channels for receiving and handling information provided by a natural or legal person reporting on actual or potential breaches, abuse of law, or non-application of Union law. The ESAs should ensure that it is possible to submit that information anonymously or confidentially, and safely. The reporting person should be protected from retaliation. The ESAs should provide feedback to the reporting person.
(30)
Harmonised supervision of the financial sector also requires that disagreements between the competent authorities of different Member States in cross–border situations are settled efficiently. The existing rules for settling such disagreements are not fully satisfactory. They should therefore be adapted so that they can be more easily applied.
(31)
Integral to the work of the ESAs on the convergence of supervisory practices is the promotion of a Union supervisory culture. Therefore, the Authority may regularly identify up to two priorities of Union-wide relevance. Those priorities should be taken into account by competent authorities when drawing up their work programmes. The Board of Supervisors of each ESA should discuss the relevant activities by the competent authorities in the next year and draw conclusions.
(32)
Assessments by the peer review committees should allow in-depth studies based on self-assessment by the reviewed authorities, followed by an evaluation by the peer review committee. The member of a competent authority under review should not take part in the assessment when it relates to that competent authority.
(33)
Experience of the ESAs has revealed the benefits of enhanced coordination in certain areas via ad hoc groups or platforms. This Regulation should provide a legal basis for, and strengthen, such arrangements through the creation of a new tool, namely, the establishment of coordination groups. Such coordination groups should promote convergence in relation to the supervisory practices undertaken by competent authorities, in particular through the exchange of information and experience. The participation of all competent authorities in those coordination groups should be mandatory and competent authorities should provide the coordination groups with the necessary information. The setting up of coordination groups should be considered wherever the competent authorities identify a need to coordinate in view of specific market developments. Such coordination groups may be set up with regard to all areas covered by the legislative acts referred to in Article 1(2) of the founding regulations.
(34)
Orderly and well-functioning international financial markets require the monitoring of third-country equivalence decisions that have been adopted by the Commission. Each ESA should monitor the regulatory and supervisory developments and the enforcement practices in those third countries. It should do so in order to verify whether the criteria, on the basis of which those decisions have been taken and of any conditions set out therein, are still fulfilled. Each ESA should submit a confidential report on its monitoring activities to the Commission on an annual basis. In that context, each ESA should also, where possible, develop administrative arrangements with third-country competent authorities to obtain information for monitoring purposes and for coordinating supervisory activities. That enhanced supervisory regime should ensure that third-country equivalence is more transparent, more predictable for the third countries concerned and more consistent across all sectors.
(35)
The representative of the ESRB on the Board of Supervisors should present the common view of the General Board of the ESRB with a particular focus on financial stability.
(36)
To ensure that the appropriate level of expertise underpins decisions relating to the prevention and countering of money laundering and of terrorist financing measures, it is necessary to set up a permanent internal committee in the EBA. That committee should be composed of high-level representatives of authorities and bodies in charge of compliance with legislation on the prevention and countering of money laundering or of terrorist financing who have expertise and decision-making powers in the area of the prevention of the use of the financial system for the purpose of money laundering or terrorist financing. That committee should also include high-level representatives from the ESAs who have expertise in different business models and their respective sectoral specificities. That committee should examine and prepare decisions to be taken by EBA. In order to avoid duplication, the new committee will replace the existing anti-money laundering subcommittee which was set up within the ESAs Joint Committee. It should be possible for the ESAs to submit written observations on any draft decision of the internal committee, which the Board of Supervisors of EBA should duly consider before taking its final decision.
(37)
In line with the objective of achieving a more coherent and viable supervisory system in the Union to prevent and counter money laundering and terrorist financing, the Commission should, after consulting all relevant authorities and stakeholders, conduct a comprehensive assessment of the implementation, functioning and effectiveness of the specific tasks conferred on EBA under this Regulation related to preventing and countering money laundering and terrorist financing. In particular, the assessment should – to the extent possible – reflect experience gained from situations where EBA requests a competent authority to: investigate possible breaches of national laws to the extent that they transpose Directives or exercise options to Member States by Union law by financial sector operators; consider imposing sanctions on that operator in respect of such breaches; or consider adopting an individual decision addressed to that financial sector operator requiring it to undertake all necessary action to comply with its obligations under national laws to the extent that they transpose Directives or exercise options granted to Member States by Union law. It should similarly reflect such experience where EBA applies national law to the extent it transposes Directives or exercises options granted to Member States by Union law. The Commission should submit that assessment as part of its report pursuant to Article 65 of Directive (EU) 2015/849, together with legislative proposals, if appropriate, to the European Parliament and to the Council by 11 January 2022. Until that assessment has been submitted, the powers granted to EBA related to preventing the use of the financial system for the purpose of money laundering or terrorist financing in Articles 9b, 17(6) and 19(4) of Regulation (EU) No 1093/2010 should be considered a provisional solution to the extent that they allow EBA to base requests to competent authorities on possible breaches of national law or allow the application of national law by EBA.
(38)
To preserve the confidentiality of the work of the ESAs, the requirements of professional secrecy should also apply to any person who provides any service, directly or indirectly, permanently or occasionally, related to the tasks of the ESA concerned.
(39)
The founding regulations as well as sectoral legislative acts require the ESAs to seek effective administrative arrangements, involving the exchange of information with third-country supervisors. The need for effective cooperation and information exchange should become all the more important when, pursuant to this amending Regulation, some of the ESAs assume additional, broader responsibilities in relation to the supervision of non-EU entities and activities. Where, in that context, the ESAs process personal data, including by transferring such data outside the Union, they are bound by the requirements of Regulation (EU) 2018/1725. In the absence of an adequacy decision or of appropriate safeguards, for example provided for in administrative arrangements within the meaning of point (b) of Article 48(3) of Regulation (EU) 2018/1725, the ESAs may exchange personal data with third-country authorities in accordance with and under the conditions of the public interest derogation set out in point (d) of Article 50(1) thereof, which in particular applies to cases of international data exchange between financial supervisory authorities.
(40)
The founding regulations provide that, in cooperation with the ESRB, the ESAs should initiate and coordinate Union-wide stress tests in order to assess the resilience of financial institutions or financial market participants to adverse market developments. It should also ensure that a consistent methodology is applied, to the extent possible, at national level to such tests. It should also be clarified, in respect of all of the ESAs, that the professional secrecy obligations of competent authorities should not prevent competent authorities from transmitting the results of stress tests to the ESAs for the purpose of publication.
(41)
To ensure a high level of convergence in the area of supervision and approval of internal models in accordance with Directive 2009/138/EC of the European Parliament and of the Council (10), EIOPA should upon request be able to assist competent authorities in the decision related to the approval of internal models.
(42)
In order for the ESAs to perform their tasks related to consumer protection, they should be entitled to coordinate so-called ‘mystery shopping activities’ of the competent authorities, if applicable.
(43)
The ESAs should be properly and adequately resourced and staffed to effectively contribute to the consistent, efficient and effective financial supervision within their respective competences under this Regulation. Additional competences and workload conferred upon the ESAs should be matched with sufficient human and financial resources.
(44)
The evolution of the scope of direct supervision might require financial institutions, and financial market participants directly supervised by the ESAs, to make additional contributions based on the estimated expenditure of the relevant ESA.
(45)
Inconsistencies in the quality, formatting, reliability and cost of trading data have a detrimental effect on transparency, investor protection and market efficiency. In order to enhance the monitoring and reconstruction of trading data, and to improve the consistency and quality of those data and their availability and accessibility at reasonable cost throughout the Union for the relevant trading venues, Directive 2014/65/EU of the European Parliament and of the Council (11) introduced a new legal framework for data reporting services, including the authorisation and supervision of data reporting services providers.
(46)
The quality of trading data and of the processing and provision of those data, including processing and provision of cross-border data, is of paramount importance to achieve the main objective of Regulation (EU) No 600/2014 of the European Parliament and of the Council (12), namely, strengthening the transparency of financial markets. The provision of core data services is therefore pivotal for users to be able to obtain the desired overview of trading activity across Union financial markets and for competent authorities to receive accurate and comprehensive information on relevant transactions.
(47)
In addition, trading data is an increasingly essential tool for effective enforcement of requirements stemming from Regulation (EU) No 600/2014. Given the cross-border dimension of data handling, data quality and the necessity to achieve economies of scale, and to avoid the adverse impact of potential divergences on both data quality and the tasks of data reporting services providers, it is beneficial and justified to transfer authorisation and supervisory powers in relation to data reporting services providers from competent authorities to ESMA, except for those benefiting from a derogation, and to specify those powers in Regulation (EU) No 600/2014 enabling, at the same time, the consolidation of the benefits arising from pooling data-related competences within ESMA.
(48)
Retail investors should be adequately informed about potential risks when they decide to invest in a financial instrument. The legal framework of the Union aims to reduce the risk of misselling where retail investors are sold financial products which do not fit their needs or expectations. To that end, Directive 2014/65/EU and Regulation (EU) No 600/2014 enhance organisational and conduct of business requirements to ensure that investment firms act in the best interests of their clients. Those requirements include enhanced risk disclosure to clients, better assessment of suitability of products recommended as well as an obligation to distribute financial instruments to the identified target market, taking into account factors such as the solvency of issuers. ESMA should make full use of its powers to ensure supervisory convergence and support national authorities in achieving a high level of investor protection and effective oversight of risks associated with financial products.
(49)
It is important to ensure the effective and efficient submission, compilation, analysis and publication of data for the purposes of calculations for determining the requirements for the pre- and post-trade transparency and trading obligation regimes, as well as for the purposes of reference data in accordance with Regulation (EU) No 600/2014 and Regulation (EU) No 596/2014 of the European Parliament and of the Council (13). ESMA, in addition to competent authorities, should therefore be conferred competences to undertake direct data gathering from market participants in relation to pre- and post-trade transparency requirements, as well as their authorisation and oversight of data reporting services providers.
(50)
Granting those competences to ESMA allows for a centrally managed authorisation and oversight, which would avoid the current situation where multiple trading venues, systematic internalisers, approved publication arrangements (APAs) and consolidated tape providers (CTPs) are required to provide multiple competent authorities with data which are only then provided to ESMA. Such a centrally managed system should be highly beneficial to the market participants in terms of higher data transparency, investor protection and market efficiency.
(51)
The conferral of data gathering powers, authorisation and oversight from competent authorities to ESMA is also instrumental to other tasks ESMA is performing under Regulation (EU) No 600/2014, such as market monitoring and ESMA’s temporary intervention powers.
(52)
For ESMA to exercise its supervisory powers effectively within the area of data processing and provision, ESMA should be able to conduct investigations and on-site inspections. ESMA should be able to impose fines or periodic penalty payments to compel data reporting services providers to put an end to an infringement, to supply complete and correct information required by ESMA or to submit them to an investigation or an on-site inspection, and to impose administrative sanctions or other administrative measures where it finds that a person has committed, intentionally or negligently, an infringement of Regulation (EU) No 600/2014.
(53)
Financial products using critical benchmarks are available in all Member States. Those benchmarks are therefore of crucial importance for the functioning of financial markets and financial stability in the Union. The supervision of a critical benchmark should therefore take a holistic view of potential impacts, not only in the Member State where the administrator is located and the Member States where its contributors are located, but across the entire Union. It is therefore appropriate that certain critical benchmarks are supervised at Union level by ESMA. To avoid duplication of tasks, administrators of critical benchmarks should be supervised only by ESMA, including any non-critical benchmarks they might administer.
(54)
As administrators of, and contributors to critical benchmarks are put under stricter requirements than administrators of, and contributors to, other benchmarks, the designation of benchmarks as critical benchmarks should be undertaken by the Commission or requested by ESMA and should be codified by the Commission. As national competent authorities have best access to data on, and information about, benchmarks they supervise, they should notify the Commission or ESMA of any benchmarks which, in their opinion, fulfil the criteria identifying critical benchmarks.
(55)
The procedure to determine the Member State of reference for benchmark administrators located in third countries that apply for recognition in the Union is cumbersome and time-consuming for both applicants and national competent authorities. Applicants might try to influence that determination in the hope of having supervisory arbitrage. Those benchmark administrators might choose their legal representative strategically in a Member State where they consider supervision less strict. A harmonised approach with ESMA as the competent authority for recognising third-country benchmark administrators avoids those risks and the costs of determining the Member State of reference as well as of the subsequent supervision. Furthermore, ESMA’s role as competent authority for recognised third-country benchmark administrators establishes it as the counterpart in the Union for supervisors in third countries, making cross-border cooperation more efficient and effective.
(56)
Many, if not the majority of, benchmark administrators are banks or financial services firms handling client money. In order not to undermine the Union’s fight against money laundering or terrorist financing, it should be a precondition for the conclusion of a cooperation arrangement with a competent authority under an equivalence regime that the country of the competent authority is not on the list of jurisdictions which have strategic deficiencies in their national anti-money laundering, and countering the financing of terrorism, regimes that pose significant threats to the financial system of the Union.
(57)
Almost all benchmarks are referenced in financial products which are available in several Member States, if not the entire Union. To detect risks related to the provision of benchmarks that might no longer be reliable or representative of the market or economic reality that they intend to measure, competent authorities, including ESMA, should cooperate and assist each other, where appropriate.
(58)
It is appropriate to provide for a reasonable period to make the necessary arrangements for the delegated and implementing acts in order to enable the ESAs and the other parties concerned to apply the rules set out in this Regulation.
(59)
Regulations (EU) No 1093/2010, (EU) No 1094/2010, (EU) No 1095/2010, (EU) No 600/2014, Regulation (EU) 2016/1011 of the European Parliament and of the Council (14) and Regulation (EU) 2015/847 of the European Parliament and of the Council (15) should therefore be amended accordingly,
