THE LAMFALUSSY
STRUCTURE
Annex
The Report of a Committee of Wise Men, chaired
by Baron Alexandre Lamfalussy, on the Regulation of European Securities
Markets was endorsed by the European Council in March 2001. In
respect of the securities sector the Report highlighted various
difficulties in the legislative system including:
— the tendency of the Council of Ministers
to add unnecessary levels of complexity to Commission proposals;
and
— diverging approaches to regulation
across Europe leading to fragmentation at the implementation stage.
It was also noted that the transposition by
Member States of Community instruments was often late and frequently
incomplete. In effect the existing system was criticised for being
too slow, too rigid and producing too much ambiguity. It failed
to distinguish between core, enduring, essential framework principles
and practical day-to-day implementing rules.
In order to address these difficulties the Lamfalussy
Report outlined a four-level approach—described below—with
the dual objectives of ensuring prompt delivery of the Financial
Services Action Plan and ensuring that in future there would be
a more accountable and efficient regulatory structure. This approach
was first applied in the securities sector and subsequently extended
to the banking and insurance and occupational pensions sectors.
To help deliver the necessary improvements in the
system a new committee structure was created.
The European Securities Committee (ESC), European
Banking Committee (EBC), and European Insurance and Occupational
Pensions Committee (EIOPC)—the "Level 2" committees—were
established to advise the Commission on policy matters. [7]They
are chaired by the Commission and comprise representatives from
Member States (Ministries).
The Committee of European Securities Supervisors
(CESR), Committee of European Banking Supervisors (CEBS), and
Committee of European Insurance and Occupational Pensions Supervisors
(CEIOPS)—the "Level 3" committees—were established
to advise the Commission on the preparation of draft implementing
measures; to contribute to the consistent implementation of Community
directives and to the convergence of supervisory practices; and
to constitute fora for information exchange between supervisory
authorities. The members are high level representatives of the
relevant supervisory authorities.
THE FOUR-LEVEL
APPROACH
The four-level Lamfalussy structure introduces a
clear division of responsibilities.
At Level 1, the Commission adopts the formal proposal
for a Directive or Regulation after a full consultation process.
Once Parliament and the Council reach agreement on the framework
principles and the definition of implementing powers contained
in the proposal, the detailed implementing measures are developed
in Level 2.
At Level 2, the Commission after consulting the relevant
Level 2 committee, requests advice from the relevant Level 3 committee
on technical implementing measures. The Level 3 committee prepares
advice in consultation with market participants, end-users and
consumers, and submits it to the Commission. The Commission sets
out the measures in a proposal to the relevant Level 2 committee
that will vote on the proposal within a maximum of three months.
The Commission then adopts the measure. During the Level 2 process,
the European Parliament is kept fully informed and the utmost
account will be taken of its view.
At Level 3, The Level 3 committees work on joint
interpretation recommendations, consistent guidelines and common
standards. Additionally they will compare regulatory practice
to ensure consistent implementation and application.
At Level 4, the Commission checks Member State compliance
with EU legislation and may take legal action against Member States
suspected of breaching Community law.
This is shown diagrammatically, below.
7 A separate European Financial Conglomerates Committee
has also been created. Back
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