The European system of financial supervision
The European system of financial supervision (ESFS) was introduced in 2010. It consists of
- the European Systemic Risk Board (ESRB)
- 3 European supervisory authorities (ESAs), namely
- the European Banking Authority (EBA)
- the European Securities and Markets Authority (ESMA)
- the European Insurance and Occupational Pensions Authority (EIOPA)
Both the ESRB and the 3 ESAs started their operation in January 2011, following the adoption of a package of legislative acts. These comprise
- Regulation (EU) No 1092/2010 establishing the ESRB
- Regulation (EU) No 1096/2010 conferring specific tasks upon the European Central Bank concerning the functioning of the ESRB
- Regulation (EU) No 1093/2010 establishing the EBA
- Regulation (EU) No 1094/2010 establishing the EIOPA
- Regulation (EU) No 1095/2010 establishing the ESMA
- 'Omnibus' Directive 2010/78/EU amending existing financial services legislation to ensure that the new authorities can work effectively
In 2011 the EU adopted a further Omnibus II directive to clarify the powers of the new authorities, particularly in the insurance sector.
The adoption of these laws followed the proposals of a Commission communication on financial supervision and the recommendations of the de Larosière expert group. This group was mandated by the Commission to give advice on how to strengthen European supervisory arrangements in light of the failures of financial supervision exposed by the financial crisis. The de Larosière group issued its report in February 2009.
Review of the ESFS
The regulations establishing the ESRB and the ESAs include provisions for the Commission to publish a general report on the operation of the new authorities and the ESFS as a whole, and a review of the mission and organisation of the ESRB. The Commission issued these reports in August 2014.
Building on these reports and taking into account the results of public consultations launched in 2013 , 2016 and 2017 , the Commission adopted a package of proposals to strengthen the ESFS in September 2017. The proposals aim to improve the mandates, governance and funding of the 3 ESAs and the functioning of the ESRB. This will ensure stronger and more integrated financial supervision across the EU.
On 12 September 2018, on the occasion of President Juncker’s state of the Union address, the Commission published a Communication on strengthening the Union framework for prudential and anti-money laundering supervision. The Communication introduces a proposal for a regulation amending a series of regulations and directives aiming to concentrate anti-money laundering powers related to the financial sector into the European Banking Authority (EBA). The proposal furthermore aims at strengthening the EBA’s mandate to ensure that all relevant authorities effectively and consistently supervise the risks of money-laundering and that they cooperate and share information.
On 21 March 2019 the European Parliament and Member States agreed on the core elements of reforming the European supervision in the areas of EU financial markets.
The agreement, which is an important step to ensure a fully functioning capital markets union, reinforces the role and powers of the European Supervisory Agencies, including that of the European Banking Authority, by strengthening its role in the area of anti-money laundering. More information on this agreement can be found in the press release of 21 March 2019, as well as in the factsheet updated on 1 April.
On 18 December 2019, the European Parliament and the Council signed Regulation (EU) 2019/2175, which reviews the powers, governance and funding of the ESAs.
On 18 December 2019, co-legislators also signed Directive (EU) 2019/2177, which amends the Solvency II Directive, the MiFID II Directive and the 4th Anti-Money Laundering Directive. The regulation gives new powers to EIOPA, EBA and ESMA.
Also as part of the ESFS review, Regulation (EU) 2019/2176 of 18 December 2019 amended the Regulation establishing the European Systemic Risk Board.
On 12 March 2021 the Commission launched a targeted consultation on the supervisory convergence and the single rulebook aiming at taking stock of the framework for supervising European capital markets, banks, insurers and pension funds. The deadline to respond to the consultation is 21 May 2021.
On 23 May 2022 the Commission published its report on the operation of the European Supervisory Authorities taking into account the results of the public consultation launched in 2021. The report assesses the ESAs´ tasks activities and follows up on the Commission´s commitment in the 2020 capital markets union action plan to monitor progress towards supervisory convergence.