Regulation 2010/1092 - EU macro-prudential oversight of the financial system and establishing a European Systemic Risk Board - Main contents

Summary of Legislation
Legislative text

1. Summary of Legislation

European Systemic Risk Board

SUMMARY OF:

Regulation (EU) No 1092/2010 on macro-prudential oversight of the financial system and the establishment of a European Systemic Risk Board

WHAT IS THE AIM OF THE REGULATION?

In the aftermath of the 2008 global financial crisis, the European Union introduced legislation on macro-prudential oversight of the financial system and establishing the European Systemic Risk Board (ESRB).

The ESRB is responsible for the macro-prudential oversight of the EU’s financial system and contributes to the prevention or mitigation of systemic risks in the EU as a whole or parts thereof. It identifies and discusses financial stability risks regardless of their origin.

It establishes the European Systemic Risk Board (ESRB) as part of the new European System of Financial Supervision (ESFS), which also includes:

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the European Banking Authority;
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the European Insurance and Occupational Pensions Authority;
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the European Securities and Markets Authority;
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the Joint Committee of European Supervisory Authorities;
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the supervisory authorities in the EU countries.

The new supervisory architecture also includes a regulation that gives the European Central Bank (ECB) certain specific tasks to support the ESRB.

KEY POINTS

Mandate, objectives and tasks

The ESRB is based in Frankfurt am Main (Germany). It is responsible for monitoring and analysing risk in the financial system as a whole (also known as macro-prudential oversight). To achieve this, the ESRB in particular:

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identifies systemic risks and classifies them according to their priority;
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issues warnings where systemic risks are deemed to be significant and makes them public if necessary;
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recommends remedial action in response to risks identified;
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can transmit a confidential warning and assessment to the Council when it considers that an emergency situation is likely to occur;
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monitors the measures taken in response to warnings and recommendations;
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coordinates with international financial organisations like the International Monetary Fund and the Financial Stability Board (FSB).

Organisation

The ESRB has the following structure:

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a General Board that ensures the performance of tasks by taking the necessary decisions;
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a Steering Committee which assists in the decision-making process;
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a Secretariat responsible for day-to-day business and providing support;
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an Advisory Scientific Committee and an Advisory Technical Committee to provide advice and assistance.

The ESRB has a chair who represents the ESRB externally and two vice-chairs. The ECB provides analytical, statistical, logistical and administrative support to the ESRB by running the ESRB’s Secretariat.

Warnings and recommendations

In the event of significant systemic risks to its objective, the ESRB provides warnings and, where appropriate, issues recommendations for remedial action, including legislative initiatives. These warnings or recommendations are addressed in particular to:

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the EU as a whole;
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1 or more EU countries;
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ECB for the banking macro-prudential supervision tasks conferred to it;
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1 or more European supervisory authorities (ESAs);
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1 or more national supervisory authorities;
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1 or more national authorities designated for the application of measures aimed at addressing systemic or macro-prudential risk;
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the European Commission in respect of relevant EU legislation;
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resolution authorities designated by EU countries; or
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the Single Resolution Board.

ESRB recommendations

Addressees of recommendations must comply or provide an explanation for any inaction. If the ESRB decides that its recommendation has not been followed or that addressees have not provided adequate justification for their inaction, it confidentially informs the addressees, the European Parliament, the Council and the relevant ESAs.

The further evolution of the European surveillance system

As the financial crisis evolved and following the worsening sovereign debt crisis in the euro area in 2010-2011, the further integration of the euro area banking systems became necessary. This is why, based on the Commission’s roadmap for setting up a banking union, the European institutions created the following.

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A Single Supervisory Mechanism (SSM), placing the ECB as the central supervisor for euro area banks (around 6,000 banks). Non-euro area countries may also decide to join.
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A Single Resolution Mechanism (SRM), the objective of which is to ensure the orderly resolution of failing banks covered by the SSM without using taxpayers’ money.

FROM WHEN DOES THE REGULATION APPLY?

It has applied since 16 December 2010.

BACKGROUND

For more information, see:

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Banking and finance (European Commission)
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Financial supervision (European Commission)
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Establishment of the ESRB (European Systemic Risk Board).

MAIN DOCUMENT

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 (OJ L 331, 15.12.2010, pp. 1-11)

Successive amendments to Regulation (EU) No 1092/2010 have been incorporated in the original text. This consolidated version is of documentary value only.

Contents

1.

Summary of Legislation

2.

Legislative text