1) Why review the European System of Financial Supervision?
Article 81 of the ESAs' founding Regulations requires the Commission to carry out a first review of the functioning of the ESAs in 2014 and every three years thereafter. It also specifies a list of issues to be assessed. The first review report is accompanied by a Staff Working Document providing a more detailed assessment of the functioning of the ESAs.
Similarly, the Regulations establishing the ESRB require one review of the ESRB's mission and organisation three years after its inception.
The Commission has assessed in detail the functioning of the ESAs and the ESRB, covering the period from their inception to December 2013. Relevant consultations involved a broad range of stakeholders. Due account was also taken of the European Parliament Resolution on the ESFS Review1 from March 2014.
2) Main findings of the review of the three European Supervisory Authorities
The review shows that the ESAs have overall performed well during their first three years of operations. They have successfully built functioning organisations, started delivering on their mandates and developed their own profiles. Notably by preparing uniform standards and contributing to supervisory convergence and coordination, the ESAs have successfully contributed to shaping the development of a single rulebook applicable to all 28 EU Member States and thus to the good functioning of the Single Market.
The ESAs report identifies several areas for improvement which can be implemented by the ESAs and the Commission in the short term and would not require legislative action. In particular, the ESAs should give a higher profile to issues related to consumer/investor protection, and strengthen the focus on supervisory convergence, amongst other things by making better use of peer reviews.
For the longer term, there could be a need to further consider other issues which would imply changes to the legislative framework for the ESAs. Any such future steps would also have to take into account the functioning of the Banking Union which is currently being established. Areas for consideration in the longer term would include:
The governance of the ESAs, in particular to further improve the capacity of the Board of Supervisors to take decisions in the interest of the EU as a whole.
A revision of the existing funding arrangements so that the ESAs could fulfil their broad range of tasks, taking into account the EU and national budgetary constraints.
3) Main findings of the review of the ESRB
The review shows that thanks to its reliance on a unique and wide range of expertise, the ESRB was a crucial driver behind introducing a macro-prudential dimension of financial policies. The ESRB has progressed well on the development of the analytical work, notably on interconnectedness.
The review also reveals that certain improvements to the ESRB framework in the short- and medium term could enhance the efficiency of macro-prudential oversight at EU level.
Some improvements could be implemented in the short term by the ESRB itself and would not require legislative action, such as a more proactive communication strategy and further expansion of the ESRB's focus beyond banking risks.
At the same time, some issues identified as warranting further attention concern the ESRB's Founding Regulations. The Commission intends to further examine the technical and legal aspects and to assess possible options for addressing these issues, in particular:
The ESRB's organisational identity with a view to enhancing its visibility and autonomy, while allowing it to continue to benefit from the ECB's reputation and expertise.
The internal governance of the ESRB, in particular to streamline decision-making arrangements involving the General Board and the Steering Committee.
An expansion of the ESRB's toolbox so that it exercises more 'soft power' to enhance flexibility and foster early intervention.
This work will have to take into account elements of the overall financial architecture which are not yet fully in place today, such as the various pillars of the Banking Union, national macro-prudential authorities and the attribution of macro-prudential responsibilities within the Single Supervisory Mechanism.
4) Next steps
This report will be forwarded to the European Parliament and to the Council for their consideration.
The Commission will carry out additional work on the matters identified in the report as warranting further attention.