Explanatory Memorandum to COM(2017)538 - Amendment of Regulation (EU) No 1092/2010 on EU macro-prudential oversight of the financial system and establishing a European Systemic Risk Board - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2017)538 - Amendment of Regulation (EU) No 1092/2010 on EU macro-prudential oversight of the financial system and establishing a ... |
|---|---|
| source | COM(2017)538  |
| date | 20-09-2017 |
• Reasons for and objectives of the proposal
Following the financial crisis1, the EU set up the European System of Financial Supervision (ESFS), built on a two-pillar system of m acr o- pru denti a l and m icro- prudential supervision.
The European Systemic Risk Board (ESRB), established in December 2010, is the macro-prudential pillar of the ESFS. The ESRB is responsible for macro-prudential overs ight of the financial syste m in the EU. Its tasks include: (i) contributing to the prevention or mitigation of systemic risks to financial stability in the EU that arise within the financial system, while taking into account m acr oeconom ic developments, so as to avoid periods of widespread financial distress; (ii) contributing to the smooth functioning of the internal market, ensuring that the financial sector has a sustainable contribution to economic growth.
The ESRB has broad membership including national central banks, supervisors and European institutions. It has specific tools, such as recommendations and warnings to shape macro-prudential policy in the EU. The ESRBs system-wide mandate is particularly relevant in monitoring and assessing cr oss-sector ia l and cross-border risks and spillovers and its coordination role limits contagion risk. Also, by facilitating the recognition of national macro-prudential measures, the ESRB ensures that cross-border leaks and regulatory arbitrage are
minimised. As a result, the ESRB has a direct effect on the effectiveness of EU countries’
macro-prudential measures and in turn on the degree of financial stability in the EU. In this
context, improving the ESRB’s functioning is expected to make macro-prudential policy more
effective.
Since its creation, the ESRB has:
• issued recommendations and warnings to a wide range of addressees;
• contributed to the ongoing development of a m acr o- prude nti a l framework in
the EU;
• successfully used the resources and expertise provided by its broad institutional membership and the independent academic input from the Advisory Scientific Committee;
• played an important role in coordinating and assessing notifications of macro-prudential measures in the EU.
The ESRB’s importance is borne out by its work as a coordination platform and information
hub, on monitoring risk from an EU-wide perspective and on setting guidance on the use of macro-prudential instruments.
However, the recent institutional changes related to Banking Union and efforts to build a Capital Markets Union, make the context in which the ESRB was set up different from the
one it now operates in. This has implications primarily for the ESRB’s composition and how it is organised. Improvements to the ESRB’s composition and how it cooperates with
The de Larosière Report (final report presented on 25 February 2009) recommended establishing Union to oversee risk in the financial system as a whole.
a
European institutions are needed to take account of incremental changes to the macro-prudential framework and the waves of regulatory developments that have taken place.
In addition, changes are needed to ensure that the ESRB is able to perform macro-prudential oversight of the entire financial system as the importance of market-based financing increases, particularly with the establishment of the Capital Markets Union.
Strengthening the ESRB's efficiency and effectiveness will improve coordination of macro-prudential policies within the EU and enable the ESRB to better fulfil its mandate. The proposal is further explained in the effect analysis.
• Consistency with existing policy provisions in the policy area
This proposal should be seen in the context of the ongoing review of the European Supervisory Agencies (ESAs). The ESRB and the ESAs are the macro- and micro-prudential pillars of the ESFS.
• Consistency with other Union policies
The ESRB Review also takes place in the context of building a Banking Union and Capital Markets Union. The expected deepening and further integration of EU capital markets requires commensurate adjustment of the oversight framework for systemic risks.
2. LEGALBASIS, SUBSIDIARITYAND PROPORTIONALITY
• Legal basis
The legal basis for the proposed amendments is the same as that for the legislative act being amended, i.e. Article 114 TFEU. The Regulation establishing the ESRB is complemented by a Council Regulation giving the European Central Bank (ECB) the task of running the ESRB Secretariat.
• Subsidiarity (for non-exclusive competence)
The ESRB is a body without legal personality. It has responsibility for macro-prudential supervision of the financial system in the EU. The proposal’s aims to make the ESRB more efficient and strengthen macro-prudential coordination in the EU can be met by supplementing already existing EU legislation, meaning that they can be best achieved at EU level rather than by different national initiatives. Furthermore, as the ESRB has a substantial contribution to the reciprocation of national macro-prudential measures, it helps national authorities to address systemic risks emerging at national level.
• Proportionality
The proposal amends an existing regulation. The changes are targeted and aim to clarify or strengthen existing provisions and are hence proportionate to the problems identified. The underlying structure of the ESRB will remain broadly unchanged.
• Choice of the instrument
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER
Contents
- CONSULTATIONS
- However, the recent institutional changes related to Banking Union and efforts to build a Capital Markets Union, make the context in which the ESRB was set up different from the
- Amendment of existing regulation
- Chair
- ESRB Secretariat
- ESRB composition
- Addressees of ESRB warnings and
- Better Regulation
ANDIMPACTASSESSMENTS
• Ex-post evaluations/fitness checks of existing legislation
As per the requirement in the ESRB Regulation, the Commission carried out a review to determine whether the ESRB’s mission and organisation need updating. The first review of the ESRB Regulation was performed in 2014.
• Stakeholder consultations
Public consultation on the macro-prudential framework and a public hearing were organised in the second half of 2016. Stakeholders generally considered the ESRB’s mandate and tasks appropriate to ensure the efficiency and effectiveness of macro-prudential policies, and expressed some support for adjusting the ESRB’s working practices to make it more efficient. Most respondents supported keeping the ECB President as Chair of the ESRB. Some respondents advocated having the Single Supervisory Mechanism and of the Single Resolution Board represented on the ESRB’s General Board to acknowledge the establishment of the Banking Union, but most did not see a need for extensive changes to the Board’s composition. Some respondents supported strengthening the ESRB Secretariat and boosting the ESRB’s role in streamlining notification procedures at EU level.
• Collection and use of expertise
n.a. – via stakeholder consultation & public hearing, see above
Impact
assessment
The Commission has carried out an effect analysis of the proposed changes to the ESRB Regulation. A formal impact assessment has not been carried out, given the targeted nature of the changes introduced by the legislative proposal.
Regulatory
fitness and simplification
[n.a.]
[n.a.]
Fundamental
rights
4. BUDGETARYIMPLICATIONS
The budgetary cost for the ESRB Secretariat is borne by the ECB and has no direct implication for the EU budget.
5. OTHERELEMENTS
• Implementation plans and monitoring, evaluation and reporting arrangements
The Regulation will be reviewed after 5 years.
• Explanatory documents (for directives)
[n.a.]
• Detailed explanation of the specific provisions of the proposal
In the current set-up, the ESRB is chaired by the ECB President. As Chair, the ECB President confers authority and credibility on the ESRB and ensures that it can effectively build and rely on the ECB’s expertise in the area of financial stability. It is therefore proposed that the ECB President serve as ESRB Chair on a permanent basis.
As the ESRB General Board has no full-time members, including no full-time Chair or Vice-Chairs, there is no member who can devote all his/her time to ESRB-related matters and duties. In addition, the official tasks of the Head of the ESRB Secretariat are limited. This may limit the visibility of the ESRB’s work, despite the ESRB Chair’s regular participation in Parliament hearings. A larger role for the Head of the ESRB Secretariat would increase the impact and effectiveness of warnings and recommendations.
The proposal here is to introduce a consultation procedure in which the General Board assesses the candidates proposed by the ECB for the post of Head of the ESRB Secretariat, in particular their qualities and experience necessary to manage the Secretariat. Parliament and Council would be informed of the procedure. This would keep the link with the ECB and maintain the Secretariat Head’s accountability to the General Board. It would also make the process more transparent, while raising the profile of the Head of the Secretariat. It is proposed to further specify the tasks conferred to the Secretariat Head, including the possibility for the Chair to delegate to it the task of representing the Chair externally.
The proposal updates the ESRB Regulation to take account of the creation of the Banking Union and to add the Single Supervisory Mechanism and the Single Resolution Board as voting members of the ESRB General Board. Corresponding adjustments should also be made to the Advisory Technical Committee and the Steering Committee.
recommendations
It is also proposed to include the ECB as a possible addressee of ESRB warnings and recommendations for ECB tasks conferred to it by the Single Supervisory Mechanism Regulation (Regulation (EC) No 1024/2013), i.e. for supervisory tasks not pertaining to the conduct of monetary policy. This would address the current asymmetry whereby national authorities can receive such warnings and recommendations as members of the General Board, but these are not sent to the ECB as the competent or designated authority at Banking Union level.
In line with Better Regulation principles and where appropriate, the ESRB’s advisory committees are expected to consult stakeholders such as market participants, consumer bodies and experts on its opinions, recommendations and decisions.