The EU will soon have in place an improved supervisory framework for European financial institutions, including strengthened supervisory powers for the European Banking Authority in the area of anti money laundering and terrorist financing.
The Romanian Presidency of the Council and the European Parliament reached a provisional agreement on a set of proposals to review the functioning of the current European system of financial supervision (ESFS). The deal will now need to be confirmed by EU ambassadors.
Today we took a major step in modernising the way financial institutions are supervised in Europe. In particular, the fact that the European Banking Authority will now have real powers to monitor anti-money laundering and terrorist financing issues should enable more convergence among member states and decisive action in the EU.
Eugen Teodorovici, minister for finance of Romania
The European system of financial supervision was established in 2011 and consists of:
-three European supervisory authorities (ESAs): the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA).
-the European Systemic Risk Board (ESRB) which oversees the financial system as a whole and coordinates EU policies for financial stability.
Following the financial crisis, the EU overhauled its financial system, including how it is regulated and overseen. It introduced a single rulebook, i.e. a set of regulations agreed at EU level and directly applicable in all EU member states and created the ESAs. These authorities play a key role in ensuring that the financial markets across the EU are well regulated, strong and stable. They contribute to the development and consistent application of the single rulebook, solve cross-border problems, and thereby promote both regulatory and supervisory convergence.
Today, the Presidency and the Parliament agreed on the first fundamental review of the tasks, powers, governance and funding of the ESAs and the ESRB, so as to adapt the authorities to the changed context in which they operate. The reform also includes provisions reinforcing the role of the EBA as regards risks posed to the financial sector by money laundering and terrorist financing activities.
The agreed text improves the existing system for supervisory convergence in order to make the process more efficient, coherent and transparent. It builds on existing tools, such as peer reviews, guidelines, Q&A while introducing new ones, for example the establishment of coordination groups at EU level.
The agreement also reviews the ESAs' governance structure. It maintains the principle that decisions have to be taken by the Board of Supervisors and ensures a key role for the national competent authorities within the ESAs governance structure. In parallel, the role and powers of the Chairperson are reinforced. The Chairperson should be selected on the basis of merit, managerial skills and experience of financial supervision, with the selection procedure respecting the principle of gender balance.
As regards the authorities' funding scheme, the final text preserves the existing system of contributions coming partly from the EU budget and partly from national competent authorities, adding the possibility of any voluntary contribution from Member States or observers.
The reform also reviews the powers of each of the three ESAs. The Presidency and the Parliament agreed to give ESMA direct supervision powers over third country critical benchmark administrators, as well as in respect to data reporting service providers, except for small local ones which should be identified through a delegated act.
Finally, the reform strengthens the role and powers of the EBA as regards anti-money laundering supervision. In particular, the EBA is given the tasks of collecting information from national competent authorities, enhancing the quality of supervision through the development of common standards, performing risk assessments and facilitating cooperation with non-EU countries on cross-border cases.
Pending technical finalisation of the text, the provisional agreement will be submitted for endorsement to EU Ambassadors. Parliament and Council will be called on to adopt the proposed regulation at first reading.