Cross-border Enforcement of Listed Companies' Duties to Inform (IVOR nr. 87) 2012/2.5.3:2.5.3 Reaction to the report by the European Commission

Cross-border Enforcement of Listed Companies' Duties to Inform (IVOR nr. 87) 2012/2.5.3

2.5.3 Reaction to the report by the European Commission

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In May 2009,1 the European Commission gave its reaction to the de Larosière report and suggested the adoption of a new financial supervision system. In September 2009,2 the Commission published legislative proposals to solve the abovementioned problems in the EU financial supervisory structure. These proposals introduce a financial supervisory structure that will be described in this sub section. The proposed financial supervisory structure makes a distinction between macro-prudential supervision that monitors the systematic risk to the entire financial system, and micro-prudential supervision that monitors the liquidity and solvency risk of individual firms.

With respect to the macro-prudential supervision, the Commission proposes the creation of a European Systematic Risk Board ("ESRB") that has the power to issue early warring statements on systematic risks and to make non-binding recommendations to take action to deal with these risks.3 The micro-prudential supervision of individual financial institutions is to be carried out in a European System of Financial Supervisors.4 The ESFS should be a network of national financial supervisors working in tandem with three newly created European Supervisory Authorities. The ESAs are the transformation of the existing level 3 Committees in a European Banking Authority ("EBA"), a European Insurance and Occupational Pensions Authority ("EIOPA") and a European Securities and Markets Authority ("ESMA").

Table 2.2 Transformation of the Committees into ESAs

Lamfalussy Level 3 Committees

European Supervisory Authorities

CEBS

EBA

CEIOPS

EIOPA

CESR

ESMA

Ina Memorandum5 released simultaneously with these legislative proposals, the European Commission addresses the costs of the currently fragmented super-vision: it undermines the single market, it imposes extra costs on financial institutions, it increases the likelihood of failure of these institutions and, in the case of emergency, the huge bail-out costs for taxpayers. In order to minimise these costs on the basis of the current legal competence provided by the EU Treaty,6 the abovementioned new ESAs should have the following extra competences:

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To develop proposals, to be endorsed by the Commission, for binding technical standards to ensure a consistent sets of rules within the EU and make progress towards a common rulebook;

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To resolve cases of disagreement between national supervisors in circumstances where EU legislation requires them to co-operate or to agree (binding mediation);

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To contribute to the consistent application of EU legislation and ensure that incorrect or inconsistent application by national supervisors is dealt with quickly and effectively;

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To co-ordinate and make binding decisions in the case of emergency.

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To exercise full supervisory powers at the European level with regard to credit rating agencies.7

Furthermore, supervision of financial institutions operating cross-border will remain in the hands of the colleges of national supervisors. On the basis of the subsidiarity principle8 the day-to-day supervision of financial institutions remains the task of national supervisors. Only in matters requiring co-operation between national supervisors that continue to disagree, does ESAs have the authority to force a settlement.

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