European System of Financial Supervision (ESFS)
In reaction to the financial crisis the European Commission mandated a High-Level Group chaired by Jacques de Larosière to make recommendations on how to strengthen European supervisory arrangements with a view to rebuild trust in the financial system. In its final report presented on 25 February 2009 (the ‘de Larosière Report'), the High-Level Group recommended new framework to the structure of supervision of the European financial institutions and markets in order to strengthen the overall financial stability in the Union. The European Council adopted on 24 November 2010 regulations and a directive, which represents a compromise agreement between the European Parliament, the Council and the Commission and based on which the ESFS comes into existence on 1 January 2011:
- Regulation (EU) No 1092/2010 of the European Parliament and of the Council of 24 November 2010 on European Union macro-prudential oversight of the financial system and establishing a European Systemic Risk Board
- Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority)
- Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority)
- Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority)
- Directive 2010/78/EU of the European Parliament and of the Council of 24 November 2010 amending Directives 98/26/EC, 2002/87/EC, 2003/6/EC, 2003/41/EC, 2003/71/EC, 2004/39/EC, 2004/109/EC, 2005/60/EC, 2006/48/EC, 2006/49/EC and 2009/65/EC in respect of the powers of the European Supervisory Authority (European Banking Authority), the European Supervisory Authority (European Insurance and Occupational Pensions Authority) and the European Supervisory Authority (European Securities and Markets Authority)
- Council Regulation (EU) No 1096/2010 of 17 November 2010 conferring specific tasks upon the European Central Bank concerning the functioning of the European Systemic Risk Board
The following institutions forms the ESFS:
At the very centre of the new reform is the division of financial market oversight between macro-prudential supervision (ESRB) and micro-prudential supervision (EBA, ESMA, EIOPA) and full harmonization of the rules for financial market participants. The main objective of the Joint Committee is to ensure cross-sectoral consistency in the area of financial conglomerates, accounting and auditing, risk analysis, measures combating money laundering, retail investment products, cooperation and exchange of information between the authorities.
Update: January 7, 2011