On June 21, the new Communication forms the Commission’s contribution to the Euro Summit.
It takes stock of the progress made to deepen EMU since the publication of the Five Presidents’ Report: Completing Europe’s EMU on June 22, 2015. READ MORE
European System of Financial Supervision
ECB Publishes Opinion on Proposed Regulation Amending EBA Regulation
The European Central Bank (“ECB“) published an opinion (CON/2018/19) (dated April 11, 2018) on a proposed Regulation amending (among other things) the EBA Regulation (Regulation 1093/2010) on April 12, 2018.
The proposed Regulation forms part of the European Commission’s legislative proposals for reforms to the European System of Financial Supervision (“ESFS“), which were published in September 2017. In November 2017, the Council of the EU requested an opinion from the ECB on the proposed Regulation.
In the opinion, the ECB welcomes the proposed Regulation’s objective of fostering effective and consistent prudential supervision and regulation across the EU. It supports further integration of the supervisory framework at EU level for the banking sector and strengthening supervision by re-examining the current set-up of the European supervisory authorities (“ESAs“) (that is, ESMA, EIOPA and the EBA).
The opinion sets out the ECB’s general observation that the banking union and the capital markets union (“CMU“) are at different stages of progress. The review of the ESAs should not necessarily produce three identical outcomes for the three ESAs, but should address their respective mandates and functions.
The ECB considers that certain of the proposed amendments to the EBA Regulation do not adequately distinguish between the scope of the ECB’s microprudential supervisory tasks and the EBA’s competence to set regulatory standards to promote supervisory convergence. It states the importance of avoiding duplication or inappropriate allocation of tasks, as this could blur the responsibilities of the two authorities and render the system less effective overall.
The ECB also makes some specific observations in the opinion concerning the revised EBA governance framework, strategic supervisory plans, stress testing and independent reviews of national competent or supervisory authorities.
A technical working document accompanied by an explanatory text is appended to the opinion, setting out the ECB’s proposed amendments to the text of the proposed Regulation.
The ECB has decided to adopt separate opinions on the Commission’s legislative proposals for reforms to the ESFS, so it advises that the opinion should be read in conjunction with an opinion it published in March 2018 on a proposed Regulation amending the European Systemic Risk Board (ESRB) Regulation (Regulation 1092/2010).
EC Publishes Report on the Application of Title III of the Solvency II Directive (2009/138/EC)
The European Commission (“EC“) has published a report on the application of Title III (of the Solvency II Directive) on April 5, 2018.
The EC has commented that, given the need for the Solvency II Directive to be generally evaluated in 2020, only one area of the group supervision regime within Article 242(2) of the Directive requires any legislative amendments at this point in time. This relates to group internal models, and as member states have often diverged on this point, the EC has stated that the European Insurance and Occupational Pensions Authority (“EIOPA“) will need enhanced powers to bring about convergence.
A proposal to reform the European System of Financial Supervision (“ESFS“) by the EC, published in September 2017, contains proposals to amend the Directive in order to do this, and to generally mitigate any potential divergences in the approval and supervision of group internal models.
Finally, the report also confirms that the EC will report on the transition period for institution for occupational retirement provisions (“IORPs“) that are operated by relevant life insurers. Pending a further extension of the decision, the EC states that the legislative proposal relating to this could be imposed before the end of 2022.
To view the report, please click here.
ESA Publishes Second Report on Risks Facing the EU Financial System
On September 5, the Joint Committee of the European Supervisory Authorities (ESAs) published its second twice yearly report on the vulnerabilities of the financial system of the EU.
The report identifies a variety of cross-sector risks and builds upon the findings of the first report published in March 2013. The report notes that a determined reaction from political sources and the European System of Financial Supervision (including the ESAs) are required to counter these threats. It notes that despite measures being adopted, including the entry into force of the CRD IV legislative package, the risks identified in the first report continue to threaten the EU’s financial system, along with other ensuing events such as:
- Concerns over the volatility of longer-term interest rates, together with the future direction of interest rates and the current prevalence of low interest rates;
- Concerns over the risk of bail-in in future bank resolutions following the bail-out of Cypriot banks, which included a bail-in of deposits of more than the EUR100,000 deposit guarantee limit; and
- Cyber attacks on the online and mobile banking services of several banks in April and June 2013.