Annexes to COM(2017)542 - Reinforcing integrated supervision to strengthen Capital Markets Union and financial integration in a changing environment - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2017)542 - Reinforcing integrated supervision to strengthen Capital Markets Union and financial integration in a changing environment. |
|---|---|
| document | COM(2017)542  |
| date | September 20, 2017 |
The Commission will present in early 2018 an ambitious Action Plan on sustainable finance with regulatory measures.
The High Level Expert Group on sustainable finance established by the Commission pointed out in its interim report that environmental, social and governance risks – for example, unprecedented and growing climate-related risks – are not yet properly integrated into financial risk assessment processes, and that the present review of the European Supervisory Authorities provides an excellent opportunity to clarify and enhance their role in assessing environmental, social and governance risks in order to secure the long-term stability of Europe’s financial sector and benefits for a sustainable economy at large. Indeed, the European Supervisory Authorities can play an important role in creating a regulatory and supervisory framework that supports mobilising and orienting private capital flows towards sustainable investments while ensuring financial stability.
As a first step towards a more comprehensive strategy, the proposals accompanying this Communication specifically require the European Supervisory Authorities to take into account of to environmental, social and governance factors arising within the framework of their mandate. For example, this will enable the Authorities to monitor how financial institutions identify, report, and address environmental, social and governance risks, thereby enhancing financial viability and stability. The European Supervisory Authorities can also provide guidance on how sustainability considerations can be effectively embodied in relevant EU financial legislation, and promote coherent implementation of such rules upon adoption.
5. Adapting the supervisory framework to harness the potential of
FinTech
FinTtech is set to play a key role in shaping the future of the EU financial sector by facilitating access to financial services, offering new ways of investment in firms, improving operational efficiency and expanding choice. Use of digital technologies is transforming the financial sector, producing consumer benefits, improving businesses' access to finance and offering vast opportunities for FinTech start-ups to scale-up. The pace of innovation in financial services has increased significantly in recent years. In developing the Financial Union, the opportunities of financial innovation have to be used to the fullest extent, but new risks also have to be managed.
The regulation and supervision underlying Banking Union and Capital Markets Union must be technology-neutral and proportionate, allowing for innovation and further technological developments and fostering an integrated market for digital financial services as part of the EU's Digital Single Market without constraints to economies of scale and scope.
As financial services become more technology and data dependent, regulators and supervisors must become familiar with these technologies in order to promote a consistent approach to both the benefits and potential risks, and to promote sound competition. .
Novel approaches present a challenge to supervisors as new technologies and alternative business models and services raise complex regulatory and supervisory questions. It is of great importance to enable supervisors to gain knowledge from working with innovative firms and learn about new technologies and business models. It is equally important that national regulators and supervisors across Member States coordinate their responses in order to avoid creating barriers to an integrated market for digital financial services.
Following its FinTech public consultation,11 the Commission will present in early 2018 an EU Action Plan setting out what detailed actions must be taken to address these challenges and allow for an integrated market for digital financial services.
As a first step in that direction, the EU's integrated supervisory framework must be adjusted to take into account the new developments. The proposals accompanying this Communication will require the European Supervisory Authorities to take account of issues related to innovation and technological development while carrying out their tasks.
Another challenge taken into account in the proposals consists in national technological innovation instruments and tools such as innovation hubs or sandboxes set up by
https://ec.europa.eu/info/finance-consultations-2017-fintech_en
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national supervisors. According to the proposal the European Supervisory Authorities would be tasked to promote supervisory convergence with specific attention being paid to innovation and technologies, through exchange of information and best practices, as well as guidelines and recommendations where appropriate. The Authorities will for example be invited to promote technology literacy within all national supervisory authorities alongside information-sharing on cyber threats, incidents and attacks.
Technology dependence also increases cybersecurity concerns. Security and operational integrity of financial services and their providers are changing rapidly and require a more co-ordinated response on the part of European regulation and supervision.
Through more coordinated approaches towards cybersecurity and resilience measure, the ESAs will also contribute to enhancing security and integrity of the European financial sector. The role of Information Sharing and Analysis Centres is particularly important in creating the necessary trust for sharing information about cybersecurity threats between financial services and public sector.
6. Conclusion
As Economic growth in Europe is getting on a steadier path, it is time to use the current window of opportunity in order for the EU to adjust its structures to make the Economic and Monetary Union more sustainable over the long run and boost the Single Market. Stronger financial integration is key in this context and will bring important benefits for the European Union, its citizens and businesses. Beyond the ongoing process of integration, the financial sector must adapt and adjust to changes linked to technological advances and its full role in order to ensure a more sustainable path for investments and economic development.
The quality and convergence of EU supervision will be key in delivering the benefits and managing the challenges in the context of these financial-sector relevant developments. The legislative proposals presented today alongside this Communication include concrete steps in order to accelerate supervisory convergence across all market segments and towards centralised and single supervision in capital markets. Moreover, they constitute first legislative steps to strengthen further the EU's leadership in the area of sustainable investment and finance and to manage the opportunities and challenges of FinTech.
The Commission invites the European Parliament and the Council to discuss and agree these proposals as a matter of priority, in order to ensure their entry into force before the end of the current legislative term in 2019. At the same time, the Commission will continue its close dialogue with all relevant stakeholders in this important area.