8 Financial services
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5413/10
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| ECB Opinion of 8 January 2010 on three Draft Regulations establishing a European Banking Authority, a European Insurance and Occupational Pensions Authority and a European Securities and Markets Authority
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| Legal base | —
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| Document originated | —
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| Deposited in Parliament | 21 January 2010
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| Department | HM Treasury
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| Basis of consideration | EM of 4 February 2010
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| Previous Committee Report | None
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| To be discussed in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
8.1 In September 2009 the Commission proposed draft Regulations
which would establish three new European Supervisory Authorities
— respectively a European Banking Authority, a European
Insurance and Occupational Pensions Authority, and a European
Securities and Markets Authority. The proposals included significant
detail of how the new bodies would operate, be staffed and be
funded, and of their powers and roles. The key proposed powers
and roles were:
- rulemaking — the authorities would develop technical
standards in all sectors (with current legislation being amended
to set out where they can make rules);
- enforcement — the authorities would have
powers to ensure consistent application of Community rules, in
a process similar to the current infraction process, except that
it would be the authority finding a Member State or supervisor
in non-compliance with the law;
- emergency powers — the authorities would
have powers over firms and supervisors in emergency situations;
- direct supervisory powers — the authorities
would have powers to directly supervise cross-border institutions
where provided for in Community legislation;
- settlement of disagreements — the authorities
would have powers to mediate in disputes between supervisory authorities,
being able to settle disputes and decide on an appropriate outcome;
- peer review — the authorities would be
required to conduct peer review of supervisors and ensure a common
supervisory culture;
- other — the authorities would maintain
a database of supervisory information, take part in colleges of
supervisors, have an international role and provide information
to the European Systemic Risk Board; and
- safeguard clause — the mediation and emergency
powers would be subject to a safeguard clause, whereby a Member
State could opt-out of an authority decision if it believed the
decision impinged on its fiscal responsibilities, but subject
to approval by a qualified majority vote in the Council.
The three authorities would take over the role of
the Lamfalussy Level 3 Committees[17]
and would have, jointly, a Board of Appeal, to consider appeals
against their decisions.
8.2 The proposals were cleared from scrutiny after
debate on the Floor of the House on 4 December 2009.[18]
8.3 While the European Central Bank (ECB) has no
direct role in the proposed Regulations, they contain provisions
affecting the European System of Central Banks (ESCB)'s contribution
to the smooth conduct of policies relating to prudential supervision
of credit institutions and the stability of the financial system.
Moreover the proposals for the supervisory authorities form part
of the package of legislation for the EU's institutional framework
for supervision and, as such, are closely linked with the proposals
for a Regulation on macro-prudential oversight of the financial
system and establishing a European Systemic Risk Board and a Council
Decision entrusting the ECB with specific tasks concerning the
functioning of the board, including provision of the resources
for the Board's Secretariat.[19]
The document
8.4 In this document the ECB gives the Council its
formal Opinion on the draft legislation to establish the European
Supervisory Authorities. It broadly welcomes the proposed institutional
framework and recommends 13 amendments to the draft Regulations,
suggesting:
- an amendment to make clear
that decisions adopted by the supervisory authorities in the context
of emergency situations are without prejudice to the competence
of ESCB central banks to provide emergency liquidity assistance
to individual financial institutions;
- a new recital referring to the duty of the supervisory
authorities to cooperate with the ECB and national central banks
of the ESCB and the need for appropriate gateways for sharing
information;
- an additional task for the supervisory authorities
— to cooperate closely with the ECB and, where appropriate,
central banks of the ESCB, as well as to provide any relevant
information necessary for the fulfilment of their tasks;
- inclusion of the ECB in the list of authorities
entitled to formulate requests to the Commission to adopt Decisions
determining the existence of an emergency situation and the list
of authorities to be consulted before the adoption of such Decisions;
- adding a requirement for the supervisory authorities
to notify the ECB of any potential emergency situations without
delay;
- an amendment to include the ECB as an observer
in meetings of the Joint Committee of European Supervisory Authorities
and the sub-committee on financial conglomerates;
- an amendment to ensure that the European Systemic
Risk Board and ESCB are not prevented from being involved in the
exchange of prudential information;
- an amendment to provide for the supervisory authorities,
the European Systemic Risk Board and the ECB to provide an opinion
to the Commission ahead of it publishing its general reports;
- an amendment to ensure that central banks benefit
from an independent right of participation in the Board of Supervisors
of the European Banking Authority as non-voting members;
- an amendment to allow non-voting representatives
of Member States' central banks with substantial involvement in
the field of banking supervision to participate in confidential
discussions relating to individual financial institutions;
- adding a recital to the proposed European Securities
and Market Authority Regulation, providing that the existing cooperation
between the Committee of European Securities Regulators and central
banks continues between the authority and central banks in matters
of common interest;
- an amendment to the proposed European Securities
and Market Authority Regulation to ensure that any tasks conferred
upon the authority should take account of the existing competences
of the ECB and central banks of the ESCB in the field of clearing
and settlement; and
- an amendment to the proposed European Securities
and Market Authority and European Insurance and Occupational Pensions
Authority Regulations to include the ECB as a non-voting member
on the Board of Supervisors.
The Government's view
8.5 The Financial Services Secretary to the Treasury
(Lord Myners) reminds us that the Government supports establishment
of three new European Supervisory Authorities, saying that they
will improve the quality and consistency of regulation and supervision
in the EU. The Minister then comments seriatim on each
of the ECB's suggestions, saying that the Government:
- is generally supportive of
the amendment proposed in relation to emergency situations, but
does not believe that the supervisory authorities will undermine
the competences of national central banks. It therefore does not
see this as an essential amendment;
- agrees with the principle that the supervisory
authorities should not be prevented from sharing information,
but would want to look very closely at any requirements for them
to do so;
- does not agree with the inclusion of a requirement
for the supervisory authorities to share information with the
ECB — there are provisions in the proposed legislation to
ensure that the European Systemic Risk Board receives the information
it requires to fulfil its tasks and its Secretariat, provided
by the ECB, will therefore receive such information to enable
it to support the work of the board. However, the Secretariat
should be independent from the ECB. The Financial Services Authority
routinely shares information with the Bank of England —
where appropriate, the Bank can choose whether to share this information
with the ECB. The Government believes that this is the correct
channel for such information sharing, and that it is not necessary
to require that the ECB or national central banks should receive
information directly from the supervisory authorities;
- does not believe that an amendment to include
the ECB in the list of bodies to be consulted about emergency
situations is necessary — central banks, including the ECB,
are to be represented on the European Systemic Risk Board, which
is included in this list of authorities, and there is no need
for the ECB to be consulted separately in the determination of
an emergency situation;
- does not believe that adding a requirement for
the supervisory authorities to notify the ECB of any potential
emergency situations without delay is necessary — central
banks, including the ECB, are to be represented on the European
Systemic Risk Board and it is the right body to interface with
the supervisory authorities on issues of EU-wide financial stability;
- does not support an amendment to include the
ECB as an observer in meetings of the Joint Committee of European
Supervisory Authorities and the sub-committee on financial conglomerates
— the Joint Committee exists to encourage cooperation between
the supervisory authorities. It may be right to establish other
cooperation arrangements, however the Government believes that
the board is the appropriate body to attend these meetings, not
the ECB. Other central banks are not to be represented here;
- agrees it is sensible for the supervisory authorities
to be able to share information with central banks and the European
Systemic Risk Board as they see appropriate, subject to confidentiality
requirements and so could support clarification with an amendment
to ensure that the European Systemic Risk Board and ESCB are not
prevented from being involved in the exchange of prudential information;
- would support an amendment requiring the European
Systemic Risk Board and supervisory authorities to submit an opinion
to the Commission but does not support a similar provision for
the ECB — while it would be right for the ECB to have a
role in reviewing the board (a similar review clause is contained
in the Council agreed text on the draft Regulation to set up the
board), the role of the supervisory authorities is different.
The ECB does not have a role in supervision policy and, in particular,
is excluded in the Treaty on the Functioning of the European Union
(TFEU) from having any such role for insurers;
- does not think an amendment to ensure that central
banks benefit from an independent right of participation in the
Board of Supervisors of the European Banking Authority as non-voting
members is necessary — the Government supports the Council
text for the Regulation for this authority, which provides for
a representative from a Member State's central bank to accompany
the representative from the competent authority responsible for
the supervision of credit institutions as an observer, where this
authority is not a central bank, for common representatives in
cases where more than one authority is competent for the supervision
and, where the item to be discussed does not fall within the competence
of this authority, a representative from the relevant national
authority to attend as an observer;
- in relation to the amendment to allow non-voting
representatives of central banks with substantial involvement
in the field of banking supervision to participate in confidential
discussions relating to individual financial institutions, notes
that central banks with a substantial involvement are already
to be represented in the European Banking Authority where they
are supervisors and does not think that it is appropriate for
central banks to participate in meetings of the European Securities
and Market Authority and the European Insurance and Occupational
Pensions Authority;
- could support a recital in the proposed European
Securities and Market Authority Regulation, providing that the
existing cooperation between the Committee of European Securities
Regulators and central banks continues between authority and central
banks in matters of common interest if it was amended to include
national supervisors, to reflect more clearly their role in addition
to central banks and the authority;
- would support an amendment to the proposed European
Securities and Market Authority Regulation to ensure that any
tasks conferred upon authority should take account of the existing
competences of the ECB and central banks of the ESCB in the field
of clearing and settlement, if national supervisors were also
added, to recognise their role in addition to central banks; and
- believes it is right for the ECB to participate
only in the European Banking Authority and therefore supports
the Council position against an amendment to the European Securities
and Market Authority and the European Insurance and Occupational
Pensions Authority Regulations to include the ECB as a non-voting
member on the Board of Supervisors.
Conclusion
8.6 Whilst clearing the document, we draw this
additional information about the proposals for the European Supervisory
Authorities to the attention of the House.
17 The Lamfalussy processes are a four-level approach
to regulation of the European financial services industry. At
the first level the European Parliament and Council adopt legislation,
setting framework principles and the Commission's implementing
powers, on the basis of Commission proposals on which it is advised
by sector-specific committees of high-level representatives of
Members States chaired by the Commission. At the second level
sector- specific committees of national regulators prepare and
advise on implementing measures to be adopted by the Commission.
At this level the committees of high-level representatives perform
a "comitology" role (comitology procedures regulate
exercise by the Commission of implementing powers conferred on
it by the Council and the European Parliament and are essentially
intended for detailed measures to implement Community legislation)
of voting on the Commission's implementing measures before their
adoption. At the third level the committees of national regulators
work on strengthening co-ordination of regulation, for instance
by establishing common interpretations of legislation and peer
group review of regulatory practice. At the fourth level the Commission
strengthens compliance with and enforcement of EU rules. Back
18
(30952) 13652/09 (30953) 13653/09 (30954) 13654/09: see HC 19-xxviii
(2008-09), chapter 6 (21 October 2009), HC 19-xxx (2008-09), chapter
2 (4 November 2009) HC 5-i (2009-10), chapter 2 (19 November 2009)
and HC Deb, 1 December 2009, cols 989-1030. Back
19
(30950)-(30951) 13645/09 13648/09: see HC 19-xxviii (2008-09),
chapter 6 (21 October 2009), HC 19-xxx (2008-09), chapter 2 (4
November 2009) and HC 5-i (2009-10), chapter 2 (19 November 2009)
and HC Deb, 1 December 2009, cols. 989-1026 and (31177)
15615/09: see HC 5-iv (2009-10), chapter 6 (15 December 2009)
and HC 5-vii (2009-10), chapter 11 (20 January 2010). Back
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