Financial Supervision - European Community legislative proposals

The European Commission has adopted legislative proposals with the aim of significantly strengthening the supervision of the financial sector in Europe. The legislation will create a new European Systemic Risk Board (ESRB) and will also set up a European System of Financial Supervisors (ESFS). The Commission has adopted the proposals in an attempt to prevent future financial crises and in order to create a supervisory framework which is less fragmented along national lines despite the existence of the European single market.

Macro- and micro-prudential supervision

The ESRB will monitor and assess risks to the stability of the financial system as a whole ("macro-prudential supervision"). The ESRB will provide early warning of systemic risks that may be building up and, where necessary, recommendations for action to deal with these risks.

The ESRB will have the power to issue recommendations and warnings to Member States (including the national supervisors) and to the European Supervisory Authorities, which will have to comply or else explain why they have not done so. The heads of the ECB, national central banks, the European Supervisory Authorities, and national supervisors, will participate in the ESRB . The creation of the ESRB is aimed to be in line with other initiatives at multilateral level or outside the EU, including the creation of a Financial Stability Board by the G20.

It should be noted that the ESRB will be established by EC Regulation and will therefore be binding in its entirety and directly applicable to all Member States. Member States have a duty not to obstruct Regulations or create any local measures which may undermine them.

The ESFS will supervise individual financial institutions ("micro-prudential supervision"), consisting of a network of national financial supervisors working in tandem with new European Supervisory Authorities (ESAs), created by the transformation of existing Committees for the banking securities and insurance and occupational pensions sectors. There will be a European Banking Authority (EBA), a European Insurance and Occupational Pensions Authority (EIOPA), and a European Securities and Markets Authority (ESMA).

There are currently three financial services committees for micro-financial supervision at EU level, with advisory powers only: the Committee of European Banking Supervisors (CEBS), Committee of European Insurance and Occupational Pensions Committee (CEIOPS) and the Committee of European...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT