30 September 2013

Statements by ESA chairs at annual ECON Committee hearing

ESMA/Maijoor

Maijoor gave a brief update on ESMA's progress over the past year and highlighted areas where he believed changes would allow ESMA to fulfil its role better [abridged].

"We continue to progress in the area of investor protection, through the development of guidelines on remuneration and UCITS/ETFs as well as direct warnings to investors and the collection and analysis of data on financial consumer trends. We believe that critical to enhancing our progress in this area will be the finalisation of PRIPs and MiFID II/MiFIR in the coming months.

"While we have progressed in the area of supervisory convergence, it has not been as significant as we would have hoped. While I think the governance of the ESAs works well for the single rulebook and direct supervision, there is more tension around convergence, as it requires the assessment of colleagues’ supervisory practices. To improve the organisation and governance of our convergence work, ESMA will introduce changes aimed at strengthening our peer review tool with more on-site visits, targeting of topical supervisory matters and more independent assessment teams.

"The current 60/40 contribution weighting of ESMA’s budget, between National Competent Authorities and the EU institutions, means that any increase in ESMA’s budget automatically increases the financial contribution of national authorities, which may be problematic in the current circumstances. This results in tensions, as it implicitly undermines the regulatory reform agenda, which requires the strengthening of regulation and supervision both at EU and national level. In terms of resolving these conflicts, I believe that a move to either 100 per cent EU funding, a broader use of industry fees related to direct supervision or administrative acts by ESMA, such as the recognition of 3rd country CCPs, or a combination of both should be considered to ensure a sustainable funding model. Finally, and even more importantly, I think the ESAs should be funded through an independent budget line in the General Budget of the EU to reinforce their status as independent authorities.

Full statement

Annex - Facts & Figures

EBA/Enria

The ECB will soon start its comprehensive balance sheet assessment of the banks envisaged in the Council Regulation establishing the Single Supervisory Mechanism (SSM). We have to be clear: there will be one asset quality review only, conducted by the competent authorities – which for the banks falling under the remit of the SSM will be the ECB – and only one stress test, which the EBA will closely coordinate with the ECB and other national competent authorities. These exercises will be the first litmus test on the functioning of the new institutional arrangements.

Single Rulebook

I would like to bring to your attention four issues, which I consider of paramount importance in developing the Single Rulebook:

i. some form of involvement of the EBA staff in the technical discussions on primary banking legislation would be very beneficial, especially in defining the scope and timelines for mandates to the EBA;

ii. the degree of national flexibility in key legislative provisions can be very detrimental to the achievements of the objectives assigned to the EBA; for instance, it is very difficult for us to perform mediation in the area of recovery and resolution, if national discretion is not constrained within a European framework of resolution planning and coordination among authorities: e.g. in case of carving out certain creditors from bail-in;

iii. a stronger legal basis would better support our efforts in the area of consumer protection: we are developing important work in the area of responsible lending, complaints handling, product oversight and governance, and the distribution of structured funding products, but for this work we are relying mostly on provisions on corporate governance and internal controls in prudential Directives as a legal basis, as no Directive on consumer protection has so far been brought into the EBA’s scope of action in Article 1 of our founding Regulation, and we have so far been assigned only one technical standard;

iv. resource constraints are becoming increasingly biting; our ability to deliver is increasingly dependent on the support of staff from national competent authorities, now subject to further strain, with the establishment of the SSM. An independent budget line, accompanied by a more adequate allocation of resources is crucial to keep up with our challenging tasks.

Full statement

Annex - List of EBA deliverables

EIOPA/Bernardino

Bernardino began with an introduction of the achievements of the Joint Committee of the three European Supervisory Authorities (ESAs), which he chairs. He then focused on EIOPA’s work and reported on EIOPA's activities over the last year.

Challenges and way forward

Looking at the current challenges there are three key points where I see a clear need for evolution: to strengthen EIOPA’s operational independence, to reinforce our independent challenging role towards National Competent Authorities and to enhance EIOPA’s mandate and powers to ensure better coordinated supervision.

Firstly, let me stress that the current financing arrangements affect the overall efficiency of the Authority. They are inflexible, inefficient, create administrative burden and are not optimal from an operational independence perspective...

Furthermore it is extremely important to ensure a degree of flexibility in the budgetary framework in order to be possible to attract highly qualified staff, especially in critical areas for our mission going forward like the supervision and validation of internal models and the independent assessment of supervisory practices.

Secondly, in order to ensure an adequate and consistent level of supervision, for the benefit of consumer protection and financial stability, it is fundamental to strengthen our independent challenging role towards National Competent Authorities.

The current power of EIOPA to conduct an inquiry into a particular type of financial institution, type of product, or type of conduct, should be extended. This power should not be confined to situations of potential threats to the stability of the financial system but be used more generally to support the independent assessment of supervisory practices.

Furthermore, it is essential to avoid the burdensome case-by-case discussions on EIOPA’s access to individual company information. Going forward, EIOPA should obtain access to the information included in the harmonised templates developed for Solvency II in a direct and efficient way.

Thirdly, we need to take further steps to ensure better coordinated supervision at Union level. In this context EIOPA should be tasked with a centralised oversight role in the field of internal models and, as part of a step-by-step approach, consideration should be made to assign EIOPA an enhanced supervisory role for the largest important cross-border insurance groups.

Full statement

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