2009/0140(COD)

European Systemic Risk Board ESRB: establishment; macro-prudential oversight of the financial system

Procedure completed

2009/0140(COD) European Systemic Risk Board ESRB: establishment; macro-prudential oversight of the financial system
RoleCommitteeRapporteurShadows
Opinion AFCO MÉNDEZ DE VIGO Íñigo (EPP)
Opinion BUDG
Lead ECON GOULARD Sylvie (ALDE)
Opinion EMPL
Opinion JURI REGNER Evelyn (S&D)
Lead committee dossier: ECON/7/01060
Legal Basis TFEU TFEU 114-p1
Subjects
Links

Activites

  • 2010/12/15 Final act published in Official Journal
  • 2010/11/24 Final act signed
  • 2010/11/24 End of procedure in Parliament
  • 2010/11/17 Act adopted by Council after Parliament's 1st reading
  • #3045
  • 2010/11/17 Council Meeting
  • 2010/09/22 Text adopted by Parliament, 1st reading/single reading
    • T7-0335/2010 summary
  • #3030
  • 2010/09/07 Council Meeting
  • #3027
  • 2010/07/13 Council Meeting
  • 2010/07/07 Text adopted by Parliament, partial vote at 1st reading/single reading
    • T7-0271/2010 summary
    • Results of vote in Parliament
  • 2010/07/07 Commission response to text adopted in plenary
  • 2010/07/06 Debate in Parliament
  • 2010/05/25 Committee report tabled for plenary, 1st reading/single reading
  • 2010/05/10 Vote in committee, 1st reading/single reading
  • 2010/03/11 Deadline Amendments
  • 2010/02/10 Committee draft report
  • 2010/01/20 Economic and Social Committee: opinion, report
  • 2009/11/11 Final act published in Official Journal
  • 2009/10/26 European Central Bank: opinion, guideline, report
    • CON/2009/0088 summary
    • OJ C 270 11.11.2009, p. 0001
  • #2967
  • 2009/10/20 Council Meeting
  • 2009/10/07 Committee referral announced in Parliament, 1st reading/single reading
  • 2009/09/23 EP officialisation
  • 2009/09/23 Legislative proposal
    • COM(2009)0499 summary
    • DG Economic and Financial Affairs, REHN Olli

Documents

AmendmentsDossier
309 2009/0140(COD) European Systemic Risk Board ESRB: establishment; macro-prudential oversight of the financial system
2010/01/21 JURI 9 amendments...
source: PE-438.153
2010/02/10 ECON, ECON 88 amendments...
source: PE-438.496
2010/02/19 AFCO 35 amendments...
source: PE-439.139
2010/03/17 AFCO 21 amendments...
source: PE-439.870
2010/03/19 ECON 156 amendments...
source: PE-439.845

History

(these mark the time of scraping, not the official date of the change)

2012-02-09
activities added
  • body
    EP
    date
    2009-09-23
    type
    EP officialisation
  • date
    2009-09-23
    docs
    • text
      • PURPOSE: to establish a European Systemic Risk Board.

        PROPOSED ACT: Regulation of the European Parliament and of the Council.

        BACKGROUND: experience of the financial crisis has exposed important failures in financial supervision, both in particular cases and in relation to the financial system as a whole. A high level group of experts, chaired by Mr. Jacques de Larosière, was established to make recommendations with a view to establishing a more efficient, integrated and sustainable supervisory framework.

        The key recommendations of the de Larosière group focus on establishing:

        • a European Systemic Risk Board (ESRB) that would be responsible for macro-prudential oversight of the financial system within the Community in order to prevent or mitigate systemic risks, to avoid episodes of widespread financial distress, contribute to a smooth functioning of the Internal Market and ensure a sustainable contribution of the financial sector to economic growth;
        • a European System of Financial Supervisors (ESFS), consisting of a network of national financial supervisors working in tandem with new European Supervisory Authorities (ESAs), created by the transformation of existing European supervisory committees in a European Banking Authority (EBA), a European Securities and Markets Authority (ESMA), and a European Insurance and Occupational Pensions Authority (EIOPA).

        On 27 May 2009, the Commission published a Communication on Financial Supervision in the EU, describing in detail how these recommendations could be put into effect, focusing in particular on the establishment of the proposed ESFS and ESRB.

        The Commission notes that stakeholders, e.g. financial institutions, investors and consumers, can only have sufficient confidence in cross-border financial activities with arrangements in place that properly acknowledge the interdependence between micro and macro-prudential risks. Too often in the past, the focus of prudential supervision has been exclusively at the micro-level, with supervisors assessing the balance sheets of individual financial institutions without due consideration for interactions between institutions and between institutions and the broader financial system. Providing this broader perspective is the responsibility of macro-prudential supervisors. These supervisors shall assess potential financial-stability risks arising from developments that can impact on a sectoral level or at the level of the financial system as a whole. By addressing such risks, the ESRB would be an essential building block for an integrated EU supervisory structure necessary to promote timely and consistent policy responses among Member States, thus preventing diverging approaches and so improve the functioning of the Internal Market.

        The Regulation establishing the ESRB is completed by a Council decision which confers on the European Central Bank (ECB) the task of ensuring the Secretariat of the ESRB. Accordingly, the ECB will provide the administrative, logistical, statistical and analytical support to the ESRB.

        IMPACT ASSESSMENT: the May 2009 Communication was accompanied by an impact assessment analysing the main policy options for establishing the ESFS and ESRB. A second impact assessment has nevertheless been made in respect of the more detailed aspects of the proposal (please see SEC(2009)1234.)

        CONTENT: the ESRB is an entirely new European body with no precedent, which shall be responsible for macro-prudential oversight. The objective of the ESRB shall be threefold:

        1. it will develop a European macro-prudential perspective to address the problem of fragmented individual risk analysis at national level;
        2. it will enhance the effectiveness of early warning mechanisms by improving the interaction between micro-and macro-prudential analysis. The soundness of individual firms was too often supervised in isolation with little focus on the degree of interdependence within the financial system;
        3. it will allow for risk assessments to be translated into action by the relevant authorities.

        The ESRB shall not be conceived as a body with legal personality and binding powers but rather as a body drawing its legitimacy from its reputation for independent judgements, high quality analysis and sharpness in its conclusions.

        Tasks and powers of the ESRB: the ESRB will not have any binding powers to impose measures on Member States or national authorities. It has been conceived as a body with a high level composition that should influence the actions of policy makers and supervisors by means of its moral authority. To this end, it will not only provide high quality assessment of the macro-prudential situation but it may also issue risk warnings and recommendations which identify the potential unbalances in the financial system which are likely to increase systemic risks and the appropriate remedial actions. The ESRB will have a broad scope of activity, not limited to a specific type of entity or market. Warnings and recommendations may address any aspect of the financial system which may generate a systemic risk. It will also cooperate with the relevant international financial institutions (IMF, FSB) and third countries on issues related to macro-prudential oversight.

        Warnings and recommendations: an essential role of the ESRB is to identify risks with a systemic dimension and prevent or mitigate their impact on the financial system within the EU. To this end, the ESRB may issue risk warnings. These warnings should prompt early responses to avoid the build-up of wider problems and eventually a future crisis. If necessary, the ESRB may also recommend specific actions to address any identified risks.

        ESRB recommendations will not be legally binding. However, the addressees of recommendations cannot remain passive towards a risk which has been identified and are expected to react in some way. If the addressee agrees with a recommendation, it must communicate all the actions undertaken to follow what is prescribed in the recommendation. If the addressee does not agree with a recommendation and chooses not to act, the reasons for inaction must be properly explained. Hence, recommendations issued by the ESRB cannot be simply ignored.

        The ESRB shall decide on a case by case basis whether warnings and recommendations should be made public. On the one hand, the publication of a recommendation may increase the pressure for prompt corrective actions. On the other hand, it could trigger adverse financial-market reactions. Sensitivity of judgement will be required in each case. Moreover, it seems appropriate that warnings and recommendations should not be made public unless a qualified majority of two-thirds of the General Board decides otherwise.

        The addressees of warnings and recommendations can be the Community as a whole, one or more Member States, one or more European Supervisory Authorities, and one or more national supervisory authorities. All warnings and recommendations must be transmitted to the Council, while those related to supervisory issues should also be transmitted to the relevant ESA. This transmission to the Council and to the ESAs is not intended as a way to water down their content, but aims on the contrary at increasing the moral pressure on the addressee to act or explain and offering the possibility to the Council to comment it.

        Access to information: the interconnectedness of financial institutions and markets implies that the monitoring and assessment of potential systemic risks should be based on a broad set of relevant macro-economic and micro-financial data and indicators. The ESRB should therefore have access to all the information necessary to perform its duties while preserving the confidentiality of these data. It will be able to rely on the broad set of data already collected through the Eurosystem by the ECB on Monetary and Financial Institutions. To ensure the necessary consistency between the micro-supervisors and the ESRB, the ESRB, through its secretariat, will also be able to request the ESAs to provide information in summary or collective form. Should this information be not available (or not made available), the ESRB will be able to request data directly from national supervisory authorities, national central banks (NCBs) or other authorities of Member States. The regulation furthermore creates a general obligation on the ESAs, the NCBs and Member States to provide to the ESRB all the information needed for the fulfilment of its tasks, thus guaranteeing a wide access to the data needed for the macro-prudential analysis.

        As some individual institutions can be systemic in nature (because of their size, their interconnectedness with other financial institutions or their risk profile), the ESRB - through its secretariat - shall also have access to individual data upon a reasoned request to the ESAs.

        Relationship with the ESFS: the proposed framework for EU supervision can only work if the ESRB and ESFS cooperate efficiently. In fulfilling its role as macro-prudential supervisor, the ESRB will need a timely flow of harmonised micro-level data, while micro-prudential supervision by national authorities will benefit from the ESRB's insights into the macro-prudential environment. The Regulations also specify the procedures to be followed by the ESAs to act upon recommendations by the ESRB and how the ESAs should use their powers to ensure timely follow-up to recommendations addressed to one or more competent national supervisory authorities.

        Confidentiality: the Members of the General Board of the ESRB and the staff working for the ESRB shall be subject to the obligation of professional secrecy. The addressees, the Council and the ESAs shall also take the measures necessary for the protection of the confidential nature of the warnings and recommendations.

        The internal organisation of the ESRB: the ESRB shall be composed of: (i) a General Board; (ii) a Steering Committee and (iii) a Secretariat.

        The General Board is the decision making body of the ESRB and as such, will be responsible for the adoption of the warnings and recommendations. The composition of the General Board is a key issue for the effectiveness of the ESRB. The members of the General Board with voting rights are the Governors of national central banks; the President and the vice-President of the ECB; a Member of the European Commission; and the Chairpersons of the three European Supervisory Authorities. The members of the General Board without voting rights are: - one high level representative per Member State of the competent national supervisory authorities, and the President of the Economic and Financial Committee.

        The proposal describes in detail the role of the Chairperson, the steering committee and the secretariat as well as the Advisory Technical Committee and other sources of advice.

        Reporting obligations: the ESRB shall be accountable to the European Parliament and to the Council and shall therefore report to them at least annually. The European Parliament and the Council may also require the ESRB to report more often.

        BUDGETARY IMPLICATIONS: the budgetary cost related to the ESRB will be borne by the ECB and will not have any direct implication for the Community budget. The cost of such support will depend on the extent to which the existing staff and resources of the ECB can be used to fulfil the tasks of the Secretariat of the ESRB.

      celexid
      CELEX:52009PC0499:EN
      type
      Legislative proposal published
      title
      COM(2009)0499
    body
    EC
    commission
    • DG
      Economic and Financial Affairs
      Commissioner
      REHN Olli
    type
    Legislative proposal
  • date
    2009-10-07
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    Committee referral announced in Parliament, 1st reading/single reading
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    • The Council discussed two legislative proposals on the establishment of a European Systemic Risk Board (ESRB). Without prejudice to ongoing national parliamentary procedures, there was broad agreement on the substance on both the regulation establishing the ESRB and the Council decision entrusting the European Central Bank with specific tasks in relation to the ESRB.

      As a consequence of this support, the Council invited the presidency to start negotiations with the European Parliament on the regulation on the basis of this approach with a view to reaching agreement at first reading.

      Furthermore, the Council invited the presidency to take the necessary steps to initiate the process with the European Parliament on the Council decision, while taking note of the need for further political negotiations before reaching a final agreement in December 2009 on the complete package setting up a new supervisory structure for the EU.

    council
    Economic and Financial Affairs ECOFIN
    date
    2009-10-20
    type
    Council Meeting
  • date
    2009-10-26
    docs
    body
    type
    European Central Bank: opinion, guideline, report
  • date
    2009-11-11
    text
    • PURPOSE: to establish a European Systemic Risk Board (ESRB) which will provide macro-prudential oversight of the financial system.

      LEGISLATIVE ACT: Regulation (EU) No 1092/2010 of the European Parliament and of the Council on European Union macro-prudential oversight of the financial system and establishing a European Systemic Risk Board.

      CONTENT: following an agreement reached with the European Parliament at first reading, the Council adopted a regulation aiming to establish a European Systematic Risk Board (ESRB).

      The regulation is part of a package of legal texts underpinning a reform of the EU framework for supervision of the financial system, aimed at eliminating deficiencies that were exposed during the financial crisis. The package consists of the following regulations establishing:

      It adopted regulations establishing:

      The Council also adopted:

      • a regulation entrusting the European Central Bank with specific tasks with regard to the day-to-day running of the ESRB;
      • a directive 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 conferred on the three European authorities.

      Institution and seat: the ESRB shall have its seat in Frankfurt am Main. It shall be part of the European System of Financial Supervision (ESFS), the purpose of which is to ensure the supervision of the Union's financial system.

      The ESFS shall comprise: (i) the ESRB; (ii) the European Supervisory Authority (European Banking Authority) established by Regulation (EU) No 1093/2010; (iii) the European Supervisory Authority (European Insurance and Occupational Pensions Authority) established by Regulation (EU) No 1094/2010; (iv) the European Supervisory Authority (European Securities and Markets Authority) established by Regulation (EU) No 1095/2010; (v) the Joint Committee of the European Supervisory Authorities (Joint Committee) provided for by Article 54 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010; (vi) the competent or supervisory authorities in the Member States as specified in the Union acts referred to in Article 1(2) of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010.

      Pursuant to the principle of sincere cooperation in accordance with the Treaty on European Union, the parties to the ESFS shall cooperate with trust and full mutual respect, in particular to ensure that appropriate and reliable information flows between them.

      Missions and tasks: the ESRB's role will be to monitor and assess potential threats to the stability of the financial system. Where necessary, it will issue risk warnings and recommendations for remedial action and will monitor their implementation.

      Risks warnings and recommendations will either be of a general nature or of a specific nature. They may be addressed to the EU as a whole or to one or more Member States, or to one or more of the European supervisory authorities (ESAs), or to one or more national supervisory authorities.

      In order to enhance the awareness of risks in the economy of the Union and to prioritise such risks, the ESRB, in close cooperation with the other parties to the ESFS, shall elaborate a colour-coded system corresponding to situations of different risk levels.

      The ESRB's recommendations are expected to exert a major influence on addressees with a high quality of analysis, while addressees will be required to provide adequate justification ("act or explain") in the event of them not following its recommendations. If the ESRB judges the reaction to be inadequate, it will inform the addressees, the Council and, where relevant, the ESA concerned. On a case-by-case basis, it could decide to make the recommendations public after informing the Council.

      Organisation and structure: the ESRB shall be chaired by the President of the ECB for a term of 5 years. For the subsequent terms, the Chair of the ESRB shall be designated in accordance with the modalities determined on the basis of the review. The Chair and the Vice-Chairs shall present to the European Parliament, during a public hearing, how they intend to discharge their duties under this Regulation.

      The ESRB shall have a General Board, a Steering Committee, a Secretariat, an Advisory Scientific Committee and an Advisory Technical Committee.

      The General Board shall take the decisions necessary to ensure the performance of the tasks entrusted to the ESRB. It shall comprise: the President and the Vice-President of the ECB; the Governors of the national central banks; a Member of the Commission; the Chairperson of the European Supervisory Authority (European Banking Authority); the Chairperson of the European Supervisory Authority (European Insurance and Occupational Pensions Authority); the Chairperson of the European Supervisory Authority (European Securities and Markets Authority); the Chair and the two Vice-Chairs of the Advisory Scientific Committee; the Chair of the Advisory Technical Committee. Members of the General Board without voting rights shall comprise: one high-level representative per Member State of the competent national supervisory authorities; the President of the Economic and Financial Committee (EFC).

      The Steering Committee shall assist in the decision-making process of the ESRB by preparing the meetings of the General Board, reviewing the documents to be discussed and monitoring the progress of the ESRB's ongoing work.

      When participating in the activities of the General Board and of the Steering Committee or when conducting any other activity relating to the ESRB, the members of the ESRB shall perform their duties impartially and solely in the interest of the Union as a whole. They shall not seek nor take instructions from the Member States, the Union institutions or any other public or private body.

      Accountability and reporting obligations: at least annually and more frequently in the event of widespread financial distress, the Chair of the ESRB shall be invited to an annual hearing in the European Parliament, marking the publication of the ESRB's annual report to the European Parliament and the Council. The ESRB shall also examine specific issues at the invitation of the European Parliament, the Council or the Commission.

      The Chair of the ESRB shall hold confidential oral discussions at least twice a year and more often if deemed appropriate, behind closed doors with the Chair and Vice-Chairs of the Economic and Monetary Affairs Committee of the European Parliament on the ongoing activity of the ESRB. An agreement shall be concluded between the European Parliament and the ESRB on the detailed modalities of organising those meetings, with a view to ensuring full confidentiality.

      Revision clause: By 17 December 2013, the European Parliament and the Council shall examine this Regulation on the basis of a report from the Commission and, after having received an opinion from the ECB and the ESAs, shall determine whether the mission and organisation of the ESRB need to be reviewed. They shall, in particular, review the modalities for the designation or election of the Chair of the ESRB.

      ENTRY INTO FORCE: 16/12/2010.

    type
    Final act published in Official Journal
    docs
  • date
    2010-01-20
    docs
    • url
      http://eescopinions.eesc.europa.eu/eescopiniondocument.aspx?language=EN&docnr=0100&year=2010
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      CES0100/2010
      type
      Economic and Social Committee: opinion, report
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    type
    Economic and Social Committee: opinion, report
  • date
    2010-02-10
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    • url
      http://www.europarl.europa.eu/sides/getDoc.do?type=COMPARL&mode=XML&language=EN&reference=PE438.496
      type
      Committee draft report
      title
      PE438.496
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    EP
    type
    Committee draft report
  • body
    EP
    date
    2010-03-11
    type
    Deadline Amendments
  • date
    2010-05-10
    text
    • The Committee on Economic and Monetary Affairs adopted the report drawn up by Sylvie GOULARD (ALDE, FR) on the proposal for a regulation of the European Parliament and of the Council on Community macro prudential oversight of the financial system and establishing a European Systemic Risk Board. It recommended that the European Parliament's position at first reading under the ordinary legislative procedure (formerly known as the codecision procedure) should be to amend the Commission proposal as follows:

      Establishment and seat: the ESRB will have its seat in Frankfurt. It will be part of the European System of Financial Supervision (ESFS), the purpose of which is to ensure the supervision of the Union's financial system. Members stress the principle of sincere cooperation and state that the parties to the ESFS shall cooperate with trust and full mutual respect, in particular to ensure that appropriate and reliable information flows between them.

      'Systemic risk' : this defined as a risk of disruption in financial services, including bubbles related to the financial markets, which: (i) is caused by an impairment of all or parts of the Union's financial system; and (ii) has the potential to have serious negative consequences for the internal market and the real economy. All types of financial intermediaries, markets and infrastructure are potentially systemically important to some degree.

      Tasks: Members add that the ESRB must (a) identify and/or collect the relevant data from financial institutions and through the ESAs; (b) declare the existence of an emergency situation, where appropriate; (c) issue warnings where risks are deemed to be significant and, where appropriate, make them public; (d) develop a common set of quantitative and qualitative indicators (risk dashboard), which will serve as the basis to assign a supervisory rating to cross-border institutions that potentially could pose a systemic risk.

      Structure: there will be an Advisory Scientific Committee, as well as a General Board, Steering Committee and Secretariat.

      Chairperson: Members state that this newly designed system of macro supervision requires credible and high profile leadership. Therefore, given its key role and its international and internal credibility, and in the spirit of the de Larosière Report, the President of the ECB should be the Chair of the ESRB. Before taking office, the Chair and first Vice-Chair shall present to the European Parliament, during a public hearing, how they intend to discharge their duties under this Regulation. The second Vice-Chair shall be heard by the European Parliament in his or her role as Chair of the Joint Committee.

      General Board: in additions to persons stated in the proposal, Members want six independent persons appointed by the Members of the General Board with voting rights on the proposal of the Joint Committee. The nominees must not be Members of the ESAs and shall be chosen on the basis of their general competence as well as for their diverse backgrounds in academic fields or other sectors, in particular in small and medium size enterprises, trade-unions or as providers or consumers of financial services; at the time of their nomination, the Joint Committee shall indicate which persons are designated also to serve on the Steering Committee. In carrying out their responsibilities, the persons nominated shall neither seek nor take instructions from any Government, institution, body, office, entity or private person. They shall refrain from any action incompatible with their duties or the performance of their tasks.

      There is also provision for high-level representatives from international institutions and a third country, in particular a member country of the European Economic Area or the European Free Trade Association.

      A majority of two-thirds of the votes shall be required to make a warning or recommendation public.

      Members also made amendments to the composition of the Steering Committee and the Advisory Scientific Committee.

      Collection and exchange of information: if information referred to in this Article is not made available or in the event of an emergency, the General Board may call on the European Parliament and the Council to act in an appropriate way. Members also imposed additional obligation of data provision on financial institutions at the request of the ESRB.

      Colour code: in order to enhance the awareness of risks in the European economy and to prioritise such risks, the ERSB, in close cooperation with the ESFS, shall elaborate a colour-coded system corresponding to situations of different risk levels.

      Emergency situation: new provisions in the text state that if the ESRB detects a risk which may seriously jeopardise the orderly functioning and integrity of financial markets or the stability of the whole or part of the Union's financial system, it should issue a warning declaring the existence of an emergency situation. In such a case the ESRB should promptly inform the European Parliament, the Council, the Commission and the European Supervisory Authorities (ESAs) of its warning. In the event of an emergency, the ESRB should issue an emergency warning.

      Follow up to recommendations: the text enhances the significance of the European Parliament and states that where the ESRB decides that an addressee of one of its recommendations has failed to follow or has inappropriately followed that recommendation, and that the addressee has not justified such failure, it shall inform the European Parliament, as well as the Council, the Commission and, where relevant, the European Supervisory Authorities concerned. It may invite the addressees to be questioned by its competent Committee.

      Public warnings: any data on which the General Board of the ESRB bases its analysis before issuing a warning or a recommendation shall be made public in an appropriately anonymous form. In the event of confidential warnings, information shall be made available within an appropriate period of time, to be defined in the ESRB's rules of procedure.

      Reports: at least annually, but more frequently in the event of widespread financial distress, the ESRB Chair shall be invited to an annual hearing in the European

      Parliament, marking the publication of the ESRB's annual report to the European Parliament and the Council. Those hearings shall be made in a different context from the monetary dialogue between the European Parliament and the President of the ECB.

      Lastly, the Commission's report must assess whether:

      • it is appropriate to simplify and reinforce the architecture of the ESFS in order to increase the coherence between the macro and the micro levels as well as between the ESAs;
      • it is appropriate to increase the regulatory powers of the ESAs;
      • the evolution of the ESFS is consistent with that of global developments in this area;
      • there is sufficient diversity and excellence within the ESFS ;
      • accountability and transparency in relation to publication requirements are adequate.
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    2010-07-06
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    • The Council adopted a political guideline with a view to continuing negotiations with the European Parliament on a package of measures which are intended to reform the European framework for supervision of the financial system, in the wake of the global financial crisis.

      The proposals, presented by the Commission in the autumn of 2009, are:

      • draft Regulations on Community macro prudential oversight of the financial system and establishing a European Systemic Risk Board (ESRB), and entrusting the European Central Bank (ECB) with specific tasks concerning the functioning of that Board;
      • draft Regulations establishing a European Banking Authority (EBA) a European Insurance and Occupational Pensions Authority (EIOPA) and a European Securities and Markets Authority (ESMA);
      • a draft Directive intended to amend existing legislation1 in respect of the powers of these three new authorities.

      Most of these texts are subject to the ordinary legislative procedure (formerly co decision) between the Parliament and the Council. The negotiations with Parliament are intended to allow them to be adopted at first reading, so that the European Systemic Risk Board and the three new supervisory authorities can be operational from 1 January 2011.

      There is now a large degree of convergence between the two institutions, thanks to the negotiations which have already taken place, but it has not proven possible to find an overall agreement in time to enable Parliament to hold its first reading on 8 July, as originally intended. Parliament has therefore decided to postpone the vote to a subsequent plenary session.

      On the basis of the general approaches already defined, the Council has agreed on the compromise proposals submitted by the Presidency with a view to facilitating continuing negotiations. It has thus strengthened the negotiating mandate given to the Presidency, while allowing it the necessary degree of flexibility.

    council
    Economic and Financial Affairs ECOFIN
    date
    2010-07-13
    type
    Council Meeting
  • date
    2010-09-07
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    CSL
    type
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    meeting_id
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  • date
    2010-09-22
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    • url
      http://www.europarl.europa.eu/sides/getDoc.do?type=TA&language=EN&reference=P7-TA-2010-0335
      text
      • The European Parliament adopted a resolution under the ordinary legislative procedure (formerly the co decision procedure).amending the proposal for a regulation of the European Parliament and of the Council on Community macro prudential oversight of the financial system and establishing a European Systemic Risk Board. The amendments are the result of a compromise agreement between Parliament and Council. The main points are as follows:

        Establishment and seat: the ESRB will have its seat in Frankfurt. It will be part of the European System of Financial Supervision (ESFS), the purpose of which is to ensure the supervision of the Union's financial system.

        The compromise text states that the ESFS shall comprise: (a) the ESRB; (b) the European Supervisory Authority (Securities and Markets) (ESMA); (c) the European Supervisory Authority (Insurance and Occupational Pensions) (EIOPA); (d) the EBA (e) the Joint Committee of the European Supervisory Authorities (f) the competent or supervisory authorities in the Member States specified in the Regulations on EBA and  ESMA and EIOPA.

        The ESRB, ESMA, EBA and EIOPA shall be accountable to the European Parliament and the Council.

        Pursuant to the principle of sincere cooperation in accordance with the Treaty on European Union, the parties to the ESFS shall cooperate with trust and full mutual respect, in particular to ensure that appropriate and reliable information flows between them.

        Systemic risk: this defined as a risk of disruption in the financial system with the potential to have serious negative consequences for the internal market and the real economy. All types of financial intermediaries, markets and infrastructure may be potentially systemically important to some degree.

        Mission, objectives and tasks: the amended text states that the ESRB shall be responsible for the macro-prudential oversight of the financial system within the Union in order to contribute to the prevention or mitigation of systemic risks to financial stability in the Union that arise from developments within the financial system and taking into account macro-economic developments, so as to avoid periods of widespread financial distress. It shall contribute to a smooth functioning of the internal market and thereby ensure a sustainable contribution of the financial sector to economic growth.

        For this purpose, the ESRB shall carry out the following tasks:

        • determining and/or collecting and analysing all the relevant and necessary information, for the purposes of its the objectives;
        • identify and prioritise systemic risks, and issue warnings where such systemic risks are deemed to be significant and, where appropriate, make them public
        • issue recommendations for remedial action in response to the risks identified and, where appropriate, make them public;
        • issue a confidential warning addressed to the Commission when the ESRB deems that an emergency situation may arise. The ESRB shall provide with an assessment of the situation, in order for the Commission to determine the need to adopt a decision addressed to the ESAs determining the existence of an emergency situation;
        • monitoring the follow-up to warnings and recommendations;
        • cooperating closely with all the other parties to the ESFS and , where appropriate, providing the ESAs with the information on systemic risks required for the achievement of their tasks. The ESRB shall, in particular, and in collaboration with the ESAs, develop a common set of quantitative and qualitative indicators (risk dashboard) to identify and measure systemic risk;
        • coordinating with international financial organisations , particularly the IMF and the FSB as well as the relevant bodies in third countries on matters related to macro-prudential oversight.

        Structure: the ESRB shall have a General Board, a Steering Committee, a Secretariat, an Advisory Scientific Committee and an Advisory Technical Committee. The establishment of the Advisory Technical Committee should take into account existing structures with a view to avoiding any duplication. The composition of the Advisory Scientific Committee should take into account adequate rules of conflict of interests adopted by the General Board.

        Chair: the compromise text states given its key role and its international and internal credibility, and in the spirit of the de Larosière Report, the President of the ECB should be the Chair of the ESRB for the first five years after the entry into force of this Regulation. In addition, the accountability requirements should be increased and the ESRB bodies should be able to draw on a wide range of experience, backgrounds and opinions. The first Vice-Chair shall be elected by and from the Members of the General Council of the ECB for a term of five years, with regard to the need for a balanced representation of Member States overall and between those within and outside the euro area. The first Vice-Chair may be re-elected once. . The second Vice-Chair shall be the Chair of the Joint Committee. The Chair and Vice-Chairs shall present to the European Parliament, during a public hearing, how they intend to discharge their duties under this Regulation.

        General Board: as well as persons listed in the Commission proposal, the Chair and the two Vice-Chairs of the Advisory Scientific Committee and the Chair of the Advisory Technical Committee shall be members of the General Board.

        Meetings of the General Board: where appropriate, high-level representatives from international institutions carrying out other related activities may be invited to attend the meetings of the General Board. Participation in the work of the ESRB may be open to high-level representatives of the relevant authorities from third countries, in particular from EEA countries strictly limited to issues of particular relevance for them. Arrangements may be made by the ESRB specifying, in particular, the nature, scope and procedural aspects of the involvement of those third countries in the work of the ESRB. Such arrangements may provide for representation, on an ad-hoc basis, as an observer, on the General Board and should concern only items of relevance for them, excluding in any way any case where the situation of individual financial institutions or Member States may be discussed .

        A quorum of two-thirds of the Members with voting rights shall be required for any vote to be taken by the General Board. However, a majority of two-thirds of the votes shall be required to adopt a recommendation or make a warning or recommendation public.

        The text makes amendments to the composition of the Steering Committee and the Advisory Scientific Committee.

        Collection and exchange of information: if relevant data is not available from the specified authorities, the ESRB may request it from the Member State concerned, without prejudice to the prerogatives respectively conferred on the Council, the Commission (Eurostat), the ECB, the Eurosystem and the ESCB in the field of statistics and data collection. If the ESRB requests data that is not in summary or collective form, the reasoned request shall explain why data on the respective individual financial institution is deemed to be systemically relevant, and necessary, considering the prevailing market situation.

        Before each request for information which is not in summary or collective form, the ESRB shall duly consult the relevant European Supervisory Authority in order to ensure that the request is justified and proportionate. If the relevant European Supervisory Authority does not consider the request to be justified and proportionate, it shall, without delay, send the request back to the ESRB and ask for additional justification. After the ESRB has provided the relevant European Supervisory Authority with such additional justification, the requested data shall be transmitted to the ESRB from the addressees of the request, provided that the addressees have legal access to the relevant data. 

        Warnings and recommendations: the warnings or recommendations shall, at the same time as they are transmitted to the addressees also be transmitted according to strict confidentiality rules to the Council and the Commission and, where addressed to one or more national supervisory authority, to the ESAs. In order to enhance the awareness of risks in the Union economy and to prioritise such risks, the ERSB, in close cooperation with the ESFS, shall elaborate a colour-coded system corresponding to situations of different risk levels. Once the criteria of such classification have been elaborated, its warnings and recommendations shall indicate, on a case-by-case basis, and where appropriate, to which category the risk belongs.

        Follow-up of the ESRB recommendations: if the ESRB decides that its recommendation has not been followed or that the addressee(s) have failed to explain their inaction appropriately, it shall, subject to strict confidentiality rules, inform the addressees, the Council and, where relevant, the European Supervisory Authority concerned. If the ESRB has made a decision on a recommendation made public following the procedure set out in the text, the European Parliament may invite the ESRB Chair to present it and the addressee(s) may request to participate in an exchange of views.

        Public warnings and recommendations: the General Board of the ESRB shall decide on a case-by-case basis, after having informed the Council sufficiently in advance so that it is able to react, whether a warning or a recommendation should be made public. A quorum of two-thirds shall always apply in respect of decisions taken under this provision. The addressees of warnings and recommendations made public by the ESRB shall also be provided with the right of making public their views and reasoning in response thereto.

        Accountability and reporting obligations: the compromise text specifies that at least annually, but more frequently in the event of widespread financial distress, the ESRB Chair shall be invited to an annual hearing in the European Parliament, marking the publication of the ESRB's annual report to the European Parliament and the Council. Those hearings shall be made in a different context from the monetary dialogue between the European Parliament and the President of the ECB.

        The European Parliament may request the Chair of the ESRB to attend a hearing of the competent Committees of the European Parliament.

        The Chair of the ESRB shall hold confidential oral discussions at least twice a year and more often if deemed appropriate, behind closed doors with the Chair and Vice-Chairs of the Economic and Monetary Affairs Committee of the European Parliament on the ongoing activity of the ESRB. An agreement shall be concluded between the European Parliament and the ESRB on the detailed modalities of organising those meetings, with a view to ensuring full confidentiality.  The ESRB shall provide a copy of the agreement to the Council.

        Review clause: three years after entry into force of the Regulation, the European Parliament and the Council shall determine whether the missions and organisation of the ESRB need to be reviewed after having received an opinion from the ECB and the ESAs. They shall in particular review the modalities of designation or election of the Chair of the ESRB.

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European Systemic Risk Board ESRB: establishment; macro-prudential oversight of the financial system
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© European Union, 2011 – Source: European Parliament