From January 2011, the regulation of financial services across Europe is now overseen by three European Supervisory Authorities (ESAs).
The ESAs work with the newly established European Systemic Risk Board (ESRB) to ensure financial stability and to strengthen and enhance the EU supervisory framework. They will improve coordination between national supervisory authorities, such as the FSA, and raise standards of national supervision across the EU.
The ESAs are: the European Securities and Markets Agency (ESMA), the European Banking Agency (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA). They replace the level 3 (otherwise known as Lamfalussy) committees: Committee of European Banking Supervisors (CEBS), Committee of European Securities Regulators (CESR) and Committee of European Insurance and Occupational Pensions Supervsiors (CEIOPS).
What is the ESAs' role?
- The ESAs aim to create a single EU rule book. They will do this by developing draft technical standards, which will then be adopted by the European Commission as EU law. The ESAs will also issue guidance and recommendations with which national supervisors and firms must make every effort to comply.
- Where the ESAs believe that a national supervisory authority is failing to apply EU law, or is doing so in a way which appears to be in breach of EU law, they have the power to investigate. Their investigation may lead to the Authority issuing a recommendation to the national supervisor, followed by a formal opinion from the Commission (if the recommendation is not acted upon). If the supervisor does not comply with the Commission’s formal opinion, the ESA may then take decisions binding on firms or market participants to ensure they are complying with EU law.
- They can temporarily ban certain financial activities. Legislation will set out what they can ban and in what circumstances. Where an emergency has been called by the Council, they have wider-ranging powers to ban financial activities.
- In a crisis, the ESAs will provide EU-wide coordination. If an emergency is declared, the ESAs may make decisions that are binding on national supervisors and on firms. However, these would be subject to certain conditions and would be limited to ensuring compliance with EU law.
- The ESAs will mediate in certain situations where national supervisory authorities disagree. If necessary, they will be able to resolve disputes by making a decision that is binding on both parties to ensure compliance with EU law.
- They have a role in EU supervisory colleges to ensure that they function efficiently and that consistent approaches and practices are followed.
- The ESAs will conduct regular peer reviews of national supervisory authorities to improve the consistency of supervision across the EU.
- They will be able to collect information from national supervisors to allow them to fulfil their role. This information will be used for analysing market developments, coordinating EU-wide stress tests and the macro prudential analysis undertaken by the ESRB.
- They also have a remit to consider consumer protection issues.
- ESMA has direct supervisory responsibility for credit rating agencies.
What is our role?
Supervising firms in the UK remains the responsibility of the FSA. The exception to this is credit rating agencies, who are now supervised by ESMA.
We welcome the ESAs and are strongly committed to their success. We believe that the ESAs should be strong, independent organisations and that they will best achieve this by working with their members – the national supervisory authorities. The national supervisory authorities will have to work constructively with each other and with the ESAs to secure the best outcomes for firms and consumers across the EU.
We are focused on playing our part in making the ESAs effective organisations. We also want to ensure that both the FSA and its successor organisations are engaging effectively with the ESAs and our counterparts across Europe. We have set out our views on how we think the ESAs should operate. We have done this to promote an open discussion with our counterparts across Europe on the most effective way for the ESAs to work.
The FSA’s views on ESAs’ operation
More information on the ESAs can be found on their websites:
European Banking Authority
European Insurance and Occupational Pensions Authority
European Security and Markets Authority
