• About the FSA
  • What we do
    • International and EU
      • European
        • Lamfalussy
          • The Level 3 Committees
          • CEBS
          • CESR
          • CEIOPS
          • IWCFC

The Lamfalussy arrangements constitute a new approach to the devlopment and adoption of the European Unions' financial services legislation. The approach is based on the recommendations of the Committee of 'Wise Men', chaired by Baron Alexandre Lamfalussy.

It comprises a four-level procedure that speeds up the legislative process. It divides the legislation into high-level framework provisions and implementing measures. The arrangements also make provision for legislation to be modified as required to keep pace with market and supervisory developments. Open consultation procedures and greater transparency are central to the new arrangements.

Scope

The parts of the Lamfalussy framework which are of most direct relevance to regulators are the committees on which they are represented, notably the Committee of European Banking Supervisors (CEBS), the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) and the Committee of European Securities Regulators (CESR). These are sometimes called the 'Level 3 committees'. Finance ministries are also represented on so called 'Level 2' committees. These are the European Banking Committee (EBC), the European Insurance and Occupational Pensions Committee (EIOPC) and the European Securities Committee (ESC).

Lamfalussy and the FSAP

Since its formation, a number of FSAP measures have been adopted using this new process - the first directives to be adopted in line with this approach were the Market Abuse Directive and the Prospectus Directive. MiFID and the Tranparency Directive also followed this approach, and Solvency 2, the fundamental review of the capital adequacy regime for the European insurance industry, is currently being developed through the Lamfalussy framework.

• Directives and other initiatives

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The four levels

• Level 1 - framework legislation, voted on by the Council and Parliament
• Level 2 - implementing measures for the Level 1 legislation, led by the Commission
• Level 3 - supervisory committees facilitating the convergence of regulatory outcomes
• Level 4 - enforcement of all EU measures, led by the Commission

Under the Lamfalussy arrangements, the Commission proposes framework legislation and it is adopted under the 'co-decision' procedure. This involves both the European Council and the European Parliament (Level 1). It is supplemented at Level 2 by more detailed implementation measures, adopted by the Commission and endorsed by a qualified majority of Member States.

The detailed Level 2 legislation is prepared by the Commission on the basis of advice provided by representatives of national supervisory authorities, acting through the 'Level 3' committees (CEBS, CEIOPS and CESR). In finalising their advice, the Level 3 committees consult extensively with providers and users of financial services.

The Level 3 committees also aim to foster supervisory convergence and best practice, principally through the creation of (non legally binding) guidance. Finally, at Level 4, the Commission ensures that Member States are complying with applicable legislation and it pursues enforcement action where required.

The FSA's involvement

We are an active participant at a senior level in all three Level 3 committees as well as providing extensive technical input. FSA Chairman Callum McCarthy is a member of CESR, Chief Executive Hector Sants is a member of CEIOPS, and Thomas Huertas, Director, Banking Sector is a member of CEBS and sits on CEBS' Bureau.

We believe strongly that the Lamfalussy Committees, while capable of improvement, offer the best prospect of achieving regulatory convergence in the EU. We continue to contribute significantly to the Committees' work. In particular, we chair the CEBS Convergence Task Force, which has nearly completed its task of developing proposals for CEBS implementation of the Francq report recommendations on supervisory convergence. We support the work that each of the committees is now pursuing to develop their future strategies on convergence and cooperation

We are also committed to providing suitably experienced people to serve on both the Committees' Working Groups and to work as secondees within the Committees' secretariats.

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The Future of Lamfalussy

2007 was the year of the Lamfalussy review, aimed at assessing how well CEBS, CESR and CEIOPS are meeting the challenge of giving the EU a more effective regulatory system for financial services. Each committee submitted papers to the Economic and Financial Affairs Council of the EU (ECOFIN) with their recommendations for the longer term development of the Lamfalussy structure. The Inter Institutional Monitoring Group also submitted a report, as did the FSA and the Treasury in a joint paper.

ECOFIN discussed these recommendations and concluded that the arrangements were broadly working well, but some improvements need to be made. The current Lamfalussy structure is to remain largely unchanged, although ECOFIN has requested several changes to be made. It concluded that

• the Commission should study the differences in the supervisory objectives and powers of the member states' supervisors;
• the Commission should consider the inclusion of the tasks of co-operation, working towards convergence and taking into account the financial stabaility concerns of all member states, in the mandates of national supervisors;
• the Level 3 committees should submit their work programmes to the commission and report to it on the progress they make;
• the Level 3 committees should explore the possibilities of strenghtening the national application of their guidelines, standards and recommendations, without changing their legally non-binding nature;
• Qualified Majority Voting should be included in the charters of the committees; to be used where appropriate and backed up by a comply or explain system (where any member state not complying should set out it's reasons for not doing so, considering that the decisions of the committees are not legally binding);
• the committees should monitor the way different colleges of supervisors operate, and share best practices;
• the committees should work to reduce the cost of reporting through the introduction of EU wide common reporting frameworks.

The three committees are in the process of responding to these conclusions. More information will be available on this shortly.

 

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