31 May 2017

EBA publishes Opinion on EU Commission consultation on the operation of the ESAs

Regarding the optimisation of its existing tasks and powers or the need for new powers for specific prudential tasks in relation to banks, the EBA has already expressed views in its Opinion on the improvement of the decision-making framework for supervisory reporting requirements issued on 7 March 20173 and its May 2017 Opinion on own funds in the context of the CRR review. In particular, the EBA underlined in its Opinion on reporting that the Commission’s suggestion to address reporting issues by reducing the role of implementing technical standards and increasing the use of guidelines and recommendations, would not match the need to ensure maximum harmonisation and would weaken the current framework

The EBA plays a major role as guardian of the Single Rulebook, a role which could be enhanced with a strengthened advisory role to the Commission and the co-legislators. Following the crisis, banking regulation has increased in political sensitivity and competent authorities understand that legislators might prefer to directly address very technical details in secondary legislation. However, it would be important to envisage a greater reliance on EBA’s technical advice, as happens also in any national context. This could be achieved via three methods>

• First, informal engagement by the Commission services before the publication of legislative proposals.
• Second, a legal obligation should be established for the EBA to be consulted on matters falling in the fields of interest to the EBA, as defined in our founding regulation.
• Third the requirement to flag to the attention of the Commission areas where differences in national rules and practices hamper the functioning of the Single Market and require legislative intervention.

A development of other tasks and increase of powers in different areas is suggested in the consultation paper, together with possible adjustments to ESA governance. The EBA experience over the last years shows that these issues are intertwined; the current set of tools available to the EBA is appropriate for its mission, but a reflection is needed on the appropriateness of the governance framework for the exercise of specific tasks. The assessment should take account of the Banking Union which has changed significantly the governance and the decision-making process of the EBA

The consultation also envisages to review the current tripartite (banking, insurance/pensions, securities) structure of the ESAs. In particular, it seeks views on whether a “twin-peaks” model of supervision, where there is one prudential regulator/supervisor for financial institutions and one market conduct regulator/supervisor for financial markets would be more relevant than the current setting.

The current organisation of the ESAs along sectoral lines has worked well. The cooperation under the umbrella of the Joint Committee has proved very useful in fostering exchanges of views and information and aligning approaches across sectors as needed, often with one ESA developing practices subsequently rolled out to the sister organisations

Opinion

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