# EUR-Lex - 52012PC0512 - EN

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# 52012PC0512

**Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) No 1093/2010 establishing a European Supervisory Authority (European Banking Authority) as regards its interaction with Council Regulation (EU) No.../... conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions /* COM/2012/0512 final - 2012/0244 (COD) */**

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EXPLANATORY MEMORANDUM

1.           CONTEXT OF THE PROPOSAL

Today, the solidity of the banking sector
is in many instances still closely linked to the Member State in which they are
established. Doubts about the sustainability of public debt, economic growth
prospects, and the viability of credit institutions have been creating
negative, mutually reinforcing market trends. This may lead to risks for the
viability of some credit institutions as well as for the stability of the
financial system, and may impose a heavy burden for already strained public
finances of the Member States concerned.

The situation poses specific risks within
the euro area, where the single currency increases the likelihood that developments
in one Member State can create risks for economic development and the stability
of the Euro area as a whole. Furthermore, the current risk of financial
disintegration along national borders significantly undermines the Single
Market for financial services and prevents it from contributing to economic recovery.

The establishment of the European Banking Authority (EBA) by Regulation (EU) No.
1093/2010 of the European Parliament and the Council of 24 November 2010
establishing a European Supervisory Authority (European Banking Authority), and
of the European System of Financial Supervision (ESFS) already
contributed to improved cooperation between national supervisors and to the
development of a single rulebook for financial services in the EU. However,
supervision of banks remains to a large extent within national boundaries and
thereby fails to keep up with integrated banking markets. Supervisory failings
have, since the onset of the banking crisis, significantly eroded confidence in
the EU banking sector and contributed to an aggravation of tensions in euro
area sovereign debt markets.

The Commission has therefore called in May
2012, as part of a longer term vision for economic and fiscal integration, for
a banking union to restore confidence in banks and in the euro. One of the key
elements of the banking union should be a Single Supervisory Mechanism (SSM)
with direct oversight of banks, to enforce prudential rules in a strict and
impartial manner and perform effective oversight of cross border banking
markets. Ensuring that banking supervision across the Euro area abides by high
common standards will contribute to build the necessary trust between Member
States, which is a pre-condition for the introduction of any common backstops.

At the Euro area summit on 29 June, 2012,
the Heads of State or Government have called on the Commission "to present
proposals for the setting up of a single supervisory mechanism shortly. When
such a mechanism will be in place for banks in the euro area the ESM could,
following a regular decision, have the possibility to recapitalize banks
directly". The European Council conclusions of the meeting held on the
28/29 June 2012 state that this Euro Area statement and the proposals that the
Commission will present accordingly should take into account the development of
"a specific and time-bound road map for the achievement of a genuine
Economic and Monetary Union".

Under this new
mechanism, the ECB will carry out a wide range of key supervisory tasks over
credit institutions in the Euro area Member States. With a view to maintaining
and deepening the internal market, other Member States will be allowed to enter
into close collaboration with the ECB.

To avoid fragmentation
of the internal market following the establishment of the single supervisory
mechanism, the proper functioning of the EBA needs to be ensured. The role of
the EBA should therefore be preserved in order to further develop the single
rulebook and ensure convergence of supervisory practices over all EU.

Along with the proposal
for a Council Regulation conferring specific tasks on the ECB concerning
policies relating to the prudential supervision of credit institutions in
accordance with Article 127(6) TFEU, this proposal introduces targeted
amendments to the Regulation establishing the European Banking Authority.

2.           RESULTS OF CONSULTATIONS WITH THE
INTERESTED PARTIES AND IMPACT ASSESSMENTS

The Commission has taken into account the
analysis done in the context of the adoption of the "supervisory
package" creating the European Supervisory Authorities, which assessed
operational, governance, financial and legal aspects relevant to the
establishment of a SSM. The preparation of a formal impact assessment was not
possible within the timetable set by the Euro area Summit of 29 June.

3.           LEGAL ELEMENTS OF THE PROPOSAL

The proposal is based on Article 114 TFEU
since it amends Regulation (EU) No. 1093/2010 adopted under the same legal
basis.

The proposal is limited to an adjustment of
the procedural modalities under which the EBA operates to take account of the
conferral of supervisory tasks on the ECB and to ensure that the EBA can
continue to pursue its functions to protect the integrity, efficiency and
orderly functioning of the internal market for financial services and
maintaining the stability of the financial system within the internal market.
It does not alter the balance of respective competences between the EBA and
national authorities. The provisions in the proposal do not go beyond what is
strictly necessary to achieve the objectives pursued. The proposal is therefore
in line with the principles of subsidiarity and proportionality set out in
Article 5 of the Treaty on the European Union.

4.           Detailed Explanation of the Proposal

EBA powers, in particular binding
mediation/emergency situations

The wording of Articles 4, 18(1) and 35(1)
to (3) is amended to ensure that EBA can carry out its tasks also in relation
to the ECB by clarifying that the notion of "competent authorities"
includes also the ECB, as it does in the other articles which make reference to
"competent authorities".

In order to ensure that the EBA can carry
out its tasks to settle disagreements and act in emergency situations also in
relation to the ECB, in Articles 18 and 19, paragraphs 18(3a) and 19(3a) are
introduced to provide for a specific procedure in relation to the decision
taken by the EBA under Article 18(3) or 19(3). The procedure provides that if
the ECB does not comply with an action by EBA to settle a disagreement or to
address an emergency situation, it should be required to explain its reasons.
In that unlikely case, where the relevant requirements are set out in directly
applicable Union law, the EBA can adopt an individual decision addressed to the
financial institution concerned to enforce its action, and it is normally expected
to do so. This will ensure full enforceability of EBA's settlement of a
disagreement and its action in an emergency situation.

Voting modalities

The fact that the ECB will coordinate the
position of the Euro area Member States requires a review of the voting
modalities currently provided for in the EBA regulation, in order to ensure
that EBA decisions are taken in the interest of maintaining and strengthening
the internal market for financial services.

Under the EBA Regulation, decisions
concerning regulatory matters (binding technical standards, guidelines and
recommendations provided for in Articles 10, 15 and 16, and decisions to
reconsider restrictions on financial activities provided for in Article 9.5) as
well as budgetary matters (Chapter VI) are taken by the Board of Supervisors on
the basis of a qualified majority of its members, as defined in Article 16(4)
TEU and Article 3 of the Protocol No 36 on transitional provisions.

Decisions on other issues (e.g. on breach
of law according to Article 17, on settlement of disagreement under Article 19,
on the election of Management Board) are adopted by the Board of Supervisors by
simple majority of the voting members according to the rule "one man one
vote".

If voting rights remain unchanged, it
cannot be ensured that decisions taken by simple majority will always represent
the interests of the Union as a whole. Voting arrangements need therefore to be
adjusted in some specific cases of simple majority to ensure that the integrity
of the internal market remains preserved while avoiding at the same time the risk
of paralysing the EBA decision making.

The best option identified to achieve this
objective is to confer decision making powers on an independent panel and provide
for a strong reverse voting mechanism which will ensure that the proposal
prepared by the independent panel is supported by Euro area and non-Euro area
Member States. This will also ensure that Euro area Member States cannot have a
blocking minority in case of actions taken against one of them.

Article 41 of the EBA Regulation is therefore
amended in order to confer stronger decision making powers to the independent
panel on breaches of EU law and settlement of disagreements, and adapt rules on
its composition accordingly.

Article 44 of the EBA Regulation is amended
to provide that the decisions proposed by the independent panel are adopted
unless they are rejected by a simple majority, including at least three votes
of participating Member States and non-participating Member States. A specific
provision is added on the appointment of the independent panel.

Composition of the Management Board

In view of the decisive influence of
members from Member States participating in or closely cooperating with the single supervisory mechanism when electing the Management
Board (simple majority of members present), members from Member States not
participating in the SSM could not be appropriately represented adequately in
the Management Board. To ensure a balanced composition of the Management Board,
reflecting the EU as a whole and including Member States not participating in
the single supervisory mechanism, the proposal
amends the composition of the Management Board of the EBA to ensure that at
least two members from Member States not participating in the single supervisory mechanism are represented in the
Management Board.

Article 45 of the EBA Regulation is therefore
amended to ensure that the Management Board includes at least two Member States
which are not participating in the SSM.

Review of voting modalities in light of
future developments

Finally, in order to take into account any developments in the number of Member
States whose currency is the Euro or whose competent authorities have entered
into a close cooperation in accordance with Article 6 of Regulation .../..., the
Commission is required to review the proposed provisions to examine whether in
light of such developments any further adjustments are necessary to ensure that
EBA decisions are taken in the interest of maintaining and strengthening the
internal market for financial services.

5.           BUDGETARY IMPLICATION

The proposal has no implications for the EU
budget.

2012/0244 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT
AND OF THE COUNCIL

amending Regulation (EU) No 1093/2010
establishing a European Supervisory Authority (European Banking Authority) as
regards its interaction with Council Regulation (EU) No.../... conferring specific
tasks on the European Central Bank concerning policies relating to the
prudential supervision of credit institutions

THE EUROPEAN PARLIAMENT AND THE
COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union, and in particular Article 114 thereof,

Having regard to the proposal from the
European Commission,

After transmission of the draft legislative
act to the national Parliaments,

Having regard to the opinion of the
European Economic and Social Committee[1],

Having regard to the opinion of the
European Central Bank[2]

Acting in accordance with the ordinary
legislative procedure,

Whereas:

(1)       On 29 June 2012, the Euro
area Heads of State or Government have called on the Commission to present
proposals to provide for a single supervisory mechanism involving the European
Central Bank (ECB). The European Council in its conclusions of 29 June 2012 invited
the President of the European Council to develop, in close collaboration with
the President of the Commission, the President of the Eurogroup and the
President of the ECB, a specific and time-bound road map for the achievement of
a genuine Economic and Monetary Union, which includes concrete proposals on
preserving the unity and integrity of the Single Market in financial services
and which takes account of the Euro Area statement and the intention of the
Commission to bring forward proposals based on Article 127 of the Treaty on the
Functioning of the European Union (TFEU).

(2)       The provision for a single supervisory mechanism is the first step
towards the creation of a European banking union, underpinned by a true single
rulebook for financial services and composed also of a common deposit insurance
and resolution framework..

(3)       In order to provide for the
single supervisory mechanism, Council
Regulation (EU) No .../...[3][127(6)
Regulation] confers specific tasks on the ECB concerning policies relating to
the prudential supervision of credit institutions in the Member States whose
currency is the euro. Other Member States may enter in a close cooperation with
the ECB. Under that Regulation, the ECB is to coordinate and express the
position of those Member States on the decisions to be taken by the Board of
Supervisors of the European Banking Authority (EBA) falling within the scope of
the ECB tasks.

(4)       The conferral of
supervisory tasks to the ECB in the banking sector for part of the Member States
of the Union should not in any way hamper the functioning of the internal
market in the field of financial services. It is therefore necessary to ensure
the proper functioning of the EBA following that conferral.

(5)       In view of the supervisory
tasks conferred on the ECB by Council Regulation (EU) No .../... [127(6) Regulation], EBA should be able to
carry out its tasks also in relation to the ECB. In order to ensure that
existing mechanisms for settlement of disagreements and actions in emergency
situations remain effective, a specific procedure should be provided for. In
particular, if the ECB does not comply with an action by EBA to settle a
disagreement or to address an emergency situation, it should be required to
explain its reasons. In that case, whenever based on requirements set out in
directly applicable Union law EBA can adopt an individual decision addressed to
the financial institution concerned, it should do so.

(6)       In order to ensure that
interests of all Member States are adequately taken into account and to allow
for the proper functioning of the EBA with a view to maintain and deepen the
internal market in the field of financial services, the voting modalities within
the Board of Supervisors should be adapted, in particular with regard to decisions
taken by the EBA at simple majority.

(7)       Decisions concerning
breaches of Union law and settlement of disagreements should be examined by an
independent panel composed of voting members of the Board of Supervisors which
do not have any conflicts of interest, appointed by the Board of Supervisors. The
decisions proposed by the panel to the Board of Supervisors should be considered
as adopted unless rejected by a simple majority, which should include an
adequate number of votes from members from Member States participating in the SSM
and from Member States that do not participate in the SSM.

(8)       The members of the
independent panel set up according to Article 41(2) of Regulation (EU) No
1093/2010 should not be considered to be in a situation of conflict of
interest on the sole ground that they are representatives of competent
authorities which are part of the SSM and a given case to be decided upon by
the Panel concerns the SSM. The EBA should develop rules of procedure for the
panel that ensure its independence and objectivity.

(9)       The composition of the Management
Board should be balanced and proper representation of Member States not
participating in the SSM should be ensured.

(10)     In order to ensure the proper
functioning of the EBA and adequate representation of all Member States, the
voting modalities, the composition of the Management Board, and the composition
of the independent panel should be reviewed after an appropriate period of time
taking into account any experience gained and further developments.

(11)     Since the objectives of
this Regulation, namely ensuring a high, effective and consistent level of
prudential regulation and supervision across the European Union, protecting the
integrity, efficiency and orderly functioning of financial markets and
maintaining the stability of the financial system, cannot be sufficiently
achieved by the Member States and can, therefore, by reason of the scale of the
action, be better achieved at Union level, the Union may adopt measures, in
accordance with the principle of subsidiarity as set out in Article 5 of the
Treaty on European Union. In accordance with the principle of proportionality,
as set out in that Article, this Regulation does not go beyond what is
necessary in order to achieve those objectives,

HAVE ADOPTED THIS REGULATION:

Article 1

Regulation (EU) No 1093/2010 is amended as
follows:

1.           Article 4(2)(i) is
replaced by the following:

"(i) Competent
authorities as defined in Directives 2006/48/EC and 2006/49/EC, including the
ECB for matters related to the tasks conferred upon it by Council Regulation (EU)
No .../...*[127(6) TFEU Council Regulation], in Directive 2007/64/EC, and as
referred to in Directive 2009/110/EC.

__________________________

- OJ L ..., ....., p.... "

2.           Article 18 is amended as
follows:

(a) paragraph 1 is replaced by the following:

"1. In the case of
adverse developments which may seriously jeopardise the orderly functioning and
integrity of financial markets or the stability of the whole or part of the
financial system in the Union, the Authority shall actively facilitate and,
where deemed necessary, coordinate any actions undertaken by the relevant
competent supervisory authorities.

In order to be able to
perform that facilitating and coordinating role, the Authority shall be fully informed
of any relevant developments, and shall be invited to participate as an
observer in any relevant gathering by the relevant competent supervisory
authorities."

(b) the following paragraph is inserted after
paragraph 3:

"3a       Where
the Authority requests the ECB as competent authority to take the necessary
action in accordance with paragraph 3,, the ECB shall comply with it or shall
provide within 48 hours at the latest adequate justification to the Authority
for its non-compliance."

3.           In Article 19 the
following paragraph is inserted after paragraph 3:

"3a.Where the
Authority requests the ECB as competent authority to take specific action or to
refrain from action in accordance with paragraph 3,, the ECB shall comply with
it or shall within ten working days of the receipt of the request provide
adequate justification to the Authority for its non-compliance."

4.           In Article 35, paragraphs
1, 2 and 3 are replaced by the following:

"1. At the request
of the Authority, the competent authorities shall provide the Authority with
all the necessary information to carry out the duties assigned to it by this
Regulation, provided that they have legal access to the relevant information
and that the request for information is necessary in relation to the nature of the
duty in question.

2. The Authority may
also request information to be provided at recurring intervals and in specified
formats. Such requests shall, where possible, be made using common reporting
formats.

3. Upon a duly
justified request from a competent authority, the Authority may provide any
information that is necessary to enable the competent authority to carry out
its duties, in accordance with the professional secrecy obligations laid down
in sectoral legislation and in Article 70."

5.           Article 41, paragraphs 2,
3 and 4 are replaced by the following:

"2. For the purposes of Article 17 and
19, the Board of Supervisors shall establish an independent panel consisting of
the Chairperson and two members appointed by the Board of Supervisors among its
voting members. At least one member of the independent panel shall be from a
Member State which is not a participating Member State in accordance with
Regulation (EU) No .../... [127(6) TFEU Council Regulation].

The members of the panel shall act
independently and objectively in accordance with Article 42, shall not be
representatives of the competent authority concerned or of the competent
authorities which are party to the disagreement.

3. The panel shall propose a decision for
final adoption by the Board of Supervisors, in accordance with the procedure
set out in the third subparagraph of Article 44(1).

4. The Board of Supervisors shall adopt
rules of procedure for the panel referred to in paragraph 2, including rules
implementing the requirement set out in the second subparagraph of that
paragraph."

6.           In Article 42 the
following paragraph is added:

"The first and
second paragraphs are without prejudice to the tasks conferred upon the ECB by Regulation
(EU) No .../... [127(6) TFEU Council Regulation]."

7.           Article 44(1) is replaced
by the following:

"1. Decisions of
the Board of Supervisors shall be taken by a simple majority of its members.
Each member shall have one vote.

With regard to the acts
specified in Articles 10 to 16 and measures and decisions adopted under the
third subparagraph of Article 9(5) and Chapter VI and by way of derogation from
the first subparagraph of this paragraph, the Board of Supervisors shall take
decisions on the basis of a qualified majority of its members, as defined in
Article 16(4) of the Treaty on European Union and in Article 3 of the Protocol
(No 36) on transitional provisions.

With regard to
decisions in accordance with Articles 17 and 19, the decision proposed by the
panel shall be considered as adopted unless it is rejected by a simple majority
which shall include at least three votes from members of participating Member
States and three votes from members of Member States
which are neither participating Member States in accordance with Regulation (EU)
No .../...[127(6) TFEU Council Regulation] nor have entered into close cooperation
with the ECB in accordance with that Regulation

By derogation from the
third subparagraph, from the date when four or less Member
States are neither participating Member States in accordance with Regulation
(EU) No .../... [127(6) TFEU Council Regulation] nor have entered into close
cooperation with the ECB in accordance with that Regulation, the decision proposed by the panel shall be considered as
adopted unless it is rejected by a simple majority which shall include at least
one vote from members of those Member States.

Each member shall have
one vote.

With regard to the
composition of the panel in accordance with Article 41(2), the Board of
Supervisors shall strive for consensus. In the absence of consensus, decisions
of the Board of Supervisors shall be taken by a majority of three quarters of
its members. Each member shall have one vote."

8.           In Article 45(1), the
third subparagraph is replaced by the following:

"The term of
office of the members elected by the Board of Supervisors shall be 2 1/2 years.
That term may be extended once. The composition of the Management Board shall
be balanced and proportionate and shall reflect the Union as a whole. The
Management Board shall include at least two representatives from Member States
which are not participating Member States in accordance with Regulation [127(6)
TFEU Council Regulation] nor have entered into close cooperation with the ECB
in accordance with that Regulation. Mandates shall be overlapping and an appropriate
rotating arrangement shall apply."

Article 2

Without prejudice to
Article 81 of Regulation (EU) No 1093/2010, by 1 January 2016, the Commission
shall publish a report on the application of the provisions of this Regulation
in relation to:

(a)
the suitability of the voting modalities;

(b)
the composition of the Management Board; and

(c)
the composition of the independent panel
preparing decisions for the purposes of Articles 17 and 19.

The report shall take
into account in particular any developments in the number of Member States
whose currency is the Euro or whose competent authorities have entered into a
close cooperation in accordance with Article 6 of Regulation .../... and shall
examine whether in light of such developments any further adjustments of those
provisions are necessary to ensure that EBA decisions are taken in the interest
of maintaining and strengthening the internal market for financial services.

Article 3

This Regulation shall enter into force on
the day following that of its publication in the Official Journal of the
European Union.

This Regulation shall be binding
in its entirety and directly applicable in all Member States.

Done at Brussels,

For the European Parliament                       For
the Council

The President                                                 The
President

[1]               OJ C , , p. .

[2]               OJC ,
, p. .

[3]