More rules on financial supervision proposed by European Commission

The European Commission has decided to put on the table additional legislative proposals aimed at further strengthening financial supervision in Europe.

Following last month’s adoption of a legislative package to strengthen financial supervision across the EU, including the creation of a European System of Financial Supervisors with three new European supervisory authorities, the Commission is now proposing to make targeted changes to existing financial services legislation to ensure that the new authorities can work effectively.

In particular, these proposals lay down in detail the scope for the authorities to exercise their powers, ensuring a more harmonised set of financial rules through the possibility to develop draft technical standards, settle disagreements between national supervisors and facilitate the sharing of micro-prudential information.

In addition to proposals to create a European Systemic Risk Board, the package, which still has to be endorsed by member states and the European Parliament, envisages the creation of a European System of Financial Supervisors for the supervision of individual financial institutions.

The ESFS will consist of a network of national financial supervisors working in tandem with new European Supervisory Authorities, created by the transformation of existing committees for the banking, securities and insurance and occupational pensions sectors. There will be a European Banking Authority (EBA), a European Insurance and Occupational Pensions Authority (EIOPA), and a European Securities and Markets Authority (ESMA).

The new authorities in the ESFS will take over all of the functions of the existing committees, and in addition have certain extra competences, including developing proposals for technical standards, resolving cases of disagreement between national supervisors and contributing towards ensuring consistent application of technical Community rules.

Internal Market Commissioner Charley McCreevy said that further proposals for technical amendments to sectoral directives are envisaged by the Commission early in 2010, in particular in the insurance sector, which is not covered by the current proposal.