The European System of Financial Supervision and the European
Transcript of The European System of Financial Supervision and the European
TheEuropeanSystemofFinancialSupervisionandtheEuropean
SecuritiesandMarketsAuthorityDrPierreSchammo(UniversityofManchester)
@JeanMonnetCenter(KeioUniversity)
8thJanuary2011
Overview
• Historicalcontext– Financialmarketsregulation/supervisionuntilDecember2010
• TheLamfalussyprocess
• TheCommitteeofEuropeanSecuritiesRegulators(CESR)
• Financialmarketsregulation/supervisionfromJanuary2011
– ThedeLarosierereportandtheEUreformagenda
– TheEuropeanSystemofFinancialSupervision(ESFS)
– TheEuropeanSecuritiesandMarketsAuthority(ESMA)
Lamfalussy process • TheLamfalussyfour‐levelapproach,asoriginallyagreed:
– Level1:adoptionofframeworkprinciplesbywayofdirectives/regulations
– Level2:adoptionofimplementingmeasures
• (UnderLisbonTreaty:L2measuresareadoptedasdelegatedorimplementingacts(Arts290/291TFEU))
– Level3:cooperationbetweennationalsecuritiesauthorities(e.g.,UKFSA,FrenchAMF,GermanBaFin)andadoptionofsoftlawmeasurestoensureconsistentapplicationandtranspositionofEUrules
– Level4:enforcementagainstnon‐complyingMemberStates
Lamfalussy Level 3 and CESR • CreationoftheCommitteeofEuropeanSecuritiesRegulators
(CESR)in2001;tofostercooperationandcoordinationamongnationalsecuritiesauthorities
• SituatedinParis• Memberswerenationalsecuritiesauthorities(e.g.UKFSA,
FrenchAMF,ItalianConsob,etc.):competentauthorities
• Adoptednon‐bindingguidelines,recommendations,standards
• Carriedoutpeerreviews• Hadnon‐bindingmediationpowers
• Decidedbyconsensusintheshadowofavotebywayofqualifiedmajority
Problems with CESR
• Smallcommittee
• Nolegallybindingpowers• CESRwasacollectivesecuritiesactor
– CESR’spreferencesreflectthoseofitsmembers(i.e.nationalsecuritiesauthorities)
• Adversebehaviouronthepartofitsmembers
– ‘Noaction’– Defection
The financial crisis in the EU
• Banksindistress(NorthernRock,RBS,Fortis,Dexia,etc.)
• Realeconomiesaffected(recession)
• Afterinitialhesitations,financialcrisispromptsEUleaderstoconsideroverhaultoinstitutionalframeworkgoverningmarketsupervision
– EstablishmentofthedeLarosieregrouptomakeproposals
De Larosiere Report
• Makesregulatory/supervisoryproposals• Needtodealwithsystemicriskstofinancialstability(macro‐prudentialproposals)– CreationofaEuropeanSystemicRiskBoard
• Needtoreviewmicro‐prudentialsupervision
– CreationofnewEuropeanSupervisoryAuthorities;partofanewEuropeanSystemofFinancialSupervision(ESFS)
ESFS • Mainpurposeistoensurethat‘rulesapplicabletothe
financialsectorareadequatelyimplemented…’
• PartofESFSarethreenewEUbodies,called‘EuropeanSupervisoryAuthorities’(ESAs)
– ReplaceLevel‐3Committees:CESR,CEBSandCEIOPS
• CESRistransformedintoanewEuropeanSecuritiesandMarketsAuthority(ESMA)
– Sisterorganisations:EBA,EIOPA• ESAsarecollectivesecuritiesactors:decision‐makingisin
handsofrepresentativesofnationalsecuritiesauthorities,actingcollectivelywithinESAs
Powers and scope of competence
• ESMA’sFoundingRegulation
– RegulationEUNo1095/2010[2010]OJL331/84• ESMA’s‘FramingActs’
– Variouslegislativeactsandsubordinatemeasures
– FurtherbindingactswhichconfertasksonESMA
• Canalsoactinthefieldofactivitiesofmarketactorsforissuesnotdirectlycoveredinaboveacts,ifnecessarytoensureeffective/consistentapplicationofthoseacts
• ‘Appropriateaction’alsoforclearing/settlement,matterspertainingtoderivativesandtakeoverbids
ESMA composition • BoardofSupervisors(BoS)
– Votingmembersandnon‐votingmembers
– Maindecision‐makingorgan
– Decidesbysimplemajorityorqualifiedmajority.• ManagementBoard(MB)
– MadeofESMA’sChairpersonand6(voting)membersoftheBoSfor2½years• CommissionandExecutiveDirectorcanattendMB
– EnsuresthatESMAfulfillsitsmission/tasks(+hasvariousspecifictasks).
– Decidesbymajorityofmemberspresent
ESMA composition (II) • ExecutiveDirector
– Fulltimeindependentprofessionalappointedfor5years
– Inchargeofday‐to‐daymanagementofESMA(+hasvariousspecifictasks)
• Chairperson– Fulltimeindependentprofessionalappointedfor5years– RepresentsESMA
– PreparesBoSwork;chairsmeetingsofBoSandMB
• BoardofAppeal• JointCommittee:toensurecooperationandcross‐sector
consistencyamongESAs
Powers of ESMA
• Threeconsiderations:– LearningthelessonsfromfailingsinLevel‐3committees(CESR,CEBS,CEIOPS)
– Dealingwithpoliticallimitstodelegationofpowerstoregulatoryagencies
– Dealingwithconstitutionallimitstodelegationofpowers
• Case9/56Meroni[1958]ECR133
Delegation of powers – Meroni
• Case9/56Meroni
– Adelegationofpowerscannotinvolvea‘discretionarypower,implyingawidemarginofdiscretion’
– Delegationcanonlyinvolve‘clearlydefinedexecutivepowers’whichcanbesubjecttoreview‘inthelightofobjectivecriteria’.
– DelegatorcannotdelegatepowersdifferentfromitsownpowersderivedfromtheTreaty
Delegation of powers - Meroni (II)
• Delegationoflegislativepowers– RuledoutbyMeroni.AlsobyRomano(Case98/80[1981]ECR1241)
• Delegationofbindingindividualdecision‐makingpowers
– Needspre‐structuringtoensurethatdelegationdoesnotinvolvea‘widemarginofdiscretion’
Delegation of powers - ESMA
• HowcreatemorepowerfulcollectivesecuritiesactorswhilstmakingthedelegationofpowerstoESMAconstitutionallyandpoliticallyacceptable?
• Levelsandcircuits– Meaning
• Circuit‐switcherrules– AllowsESMAtotakeindividualdecisionsagainstcompetentauthoritiesormarketactors
• Level‐switcherrules– Toensureconstitutionalcomplianceorpoliticalacceptanceofdelegationofpowers
Powers of ESMA - Overview
• Participatesinadoptionofbindingtechnicalstandards(followingendorsementbyCommission)
• Adoptsguidelinesandrecommendations• PowerstoactwithrespecttobreachesofEUlaw• Conciliationandbindingdisputesettlementpowers
• Powerstoactincrisissituations• Certainday‐to‐daysupervisorypowers(egforcreditagencies)• Powertotemporarilybanorrestrictmarketactivities• Roleincolleges• etc.
Technical standards
• Participatesinadoptionofbindingtechnicalstandards– Regulatorytechnicalstandards(RTS)
• Adoptedasdelegatedacts– Implementingtechnicalstandards(ITS)
• Adoptedasimplementingacts
• ESMApreparesdraftstandards
• EuropeanCommissionendorsesdraftstandards
– LimitstoCommissionpowers?
• PowersreservedtoCouncilandEP(forRTS)
Proper application of EU rules and supervisory practices
• ESMAissuesguidelinesandrecommendations
– Aim:foster‘common,uniformandconsistentapplication’ofEUlaw+develop‘consistent,efficientandeffective’supervisorypractices
– Addressedtocompetentauthorities/marketactors
• Non‐bindingmeasures;but:
– Addresseesmeanttomake‘everyefforttocomply’
– Proceduralobligationsmeanttomakeitmoredifficulttoignoremeasures
Policing breaches of EU law
• ESMAplaysaroleinpolicingtheapplicationofitsFramingActs,includingtheRTSandITS
– Wherecompetentauthorities(i)donotapplymeasuresor(ii)applytheminamannerwhichseemstobreachEUlaw,especiallybynotmakingsurethatamarketactorcomplieswithitslegalobligations
• ESMAcanissuearecommendation(non‐binding)
– Commissioncanissueaformalopinion
• ESMAcanaddressanindividualdecisiontoamarketactorifcomp.authorityfailstocomplywithCommissionopinion
– Conditionsapply;‘lastresort’power
Conciliation and dispute settlement
• ESMAassistsauthoritiesfromdifferentM‐Ssinresolvingdisputes
- ESMAactsasamediator
• ESMAcansettleadisputeifauthoritiesunabletoreachagreementinordertoensurecompliancewithEUlaw
– ESMAaddressesanindividualdecisiontocompetentauthority
• ESMAcantakeindividualdecisionagainstmarketactorifcompetentauthorityfailstocomplywithESMA’sdecision
• Safeguardclause:toprotect‘fiscalresponsibilities’ofM‐Ss
• Powersalsoapplyforcross‐sectoraldisputesanddisputesincolleges
Emergency (crisis) situations
• Roleincoordinatingandfacilitatingactionsofcompetentauthorities(CA)incrisissituations
• PowertoaddressindividualdecisionstoCA– Inexceptionalcircumstanceswherecoordinatedactionisneededtoaddresseventsthatendangerfunctioning/integrityofmarketsorstabilityoffinancialsystem
• Powertoaddressindividualdecisiontomarketactor
– Strictconditions• Decisionregardingtheexistenceofacrisissituation• Safeguardclausetoprotect‘fiscalresponsibility’ofM‐Ss
Conclusion
• ESMAvsCESR– Resources– Decision‐making
– Powers• Morepowers!
• ESMAhasgreaterroleatL2,L3andL4ofLamfalussyprocess!
– Accountability• WillESMAsucceed?
Source:
• PSchammo,EUProspectusLaw–NewPerspectivesonRegulatoryCompetitioninSecuritiesMarkets(CambridgeUniversityPress,Cambridge,2011,forthcoming)
http://www.frcaq.com/uk/catalogue/catalogue.asp?isbn=9780521517652