Wednesday 7 July 2010

European Securities and Markets Authority ***I

P7_TA(2010)0270

Proposal for a regulation of the European Parliament and of the Council establishing a European Securities and Markets Authority (COM(2009)0503 – C7-0167/2009 – 2009/0144(COD))

2011/C 351 E/36

(Ordinary legislative procedure: first reading)

The proposal was amended on 7 July 2010 as follows (1):

AMENDMENTS BY PARLIAMENT (2)

to the Commission proposal

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

establishing a European Supervisory Authority (European Securities and Markets Authority)

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,

Having regard to the opinion of the European Economic and Social Committee (3),

Having regard to the opinion of the Committee of the Regions (4),

Having regard to the opinion of the European Central Bank (5),

Acting in accordance with the ordinary legislative procedure (6),

Whereas:

(1) The financial crisis in 2007/2008 exposed important shortcomings in financial supervision, both in particular cases and in relation to the financial system as a whole. Nationally-based supervisory models have lagged behind the financial globalisation and the integrated and interconnected reality of European financial markets, in which many financial firms operate across borders. The crisis exposed shortcomings in the area of cooperation, coordination, consistent application of Union law and trust between national supervisors.

(1a) Long before the financial crisis the European Parliament was already calling regularly for the reinforcement of a true level playing field for all actors at Union level while pointing out significant failures in the Union's supervision of ever more integrated financial markets (in its resolutions of 13 April 2000 on the Commission communication on implementing the framework for financial markets: Action Plan (7), of 21 November 2002 on prudential supervision rules in the European Union (8), of 11 July 2007 on financial services policy (2005-2010) – White Paper (9), of 23 September 2008 with recommendations to the Commission on hedge funds and private equity (10), of 9 October 2008 with recommendations to the Commission on Lamfalussy follow-up: future structure of supervision (11), of 22 April 2009 on the amended proposal for a directive of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II (12) and of 23 April 2009 on the proposal for a regulation of the European parliament and of the Council on Credit Rating Agencies (13)).

(2) A report published on 25 February 2009 by a high-level group of experts chaired by J. de Larosière (the de Larosière Report), requested by the Commission, concluded that the supervisory framework needed to be strengthened to reduce the risk and severity of future financial crises . It recommended ▐ reforms to the structure of supervision of the financial sector in the Union . That group of experts also concluded that a European System of Financial Supervisors should be created, comprising three European Supervisory Authorities, one for the banking sector, one for the insurance and occupational pensions sector and one for the securities sector, and the creation of a European Systemic Risk Council. The recommendations in the report represented the lowest level of change that the experts qualified as necessary to avoid a similar crisis to take place in the future.

(3) ▐ In its Communication of 4 March 2009 entitled ‘Driving European Recovery’ , the Commission proposed to bring forward draft legislation creating a European System of Financial Supervisors and a European Systemic Risk Board (ESRB) , and in its Communication of 27 May 2009 entitled ‘European Financial Supervision’ , it provided more detail about the possible architecture of such a new supervisory framework but did not include all the recommendations made in the de Larosière Report .

(4) The European Council, in its conclusions of 19 June 2009, recommended that a European System of Financial Supervisors, comprising three new European Supervisory Authorities, be established. The system should be aimed at upgrading the quality and consistency of national supervision, strengthening oversight of cross border groups and establishing a European single rule book applicable to all financial market participants in the Single Market. It emphasised that the European Supervisory Authorities should also have supervisory powers for credit rating agencies and invited the Commission to prepare concrete proposals on how the European System of Financial Supervisors could play a strong role in crisis situations, while stressing that decisions taken by the European Supervisory Authorities should not impinge on the fiscal responsibilities of Member States. The European Supervisory Authority (European Securities and Markets Authority) (the Authority) should also be the supervisor for Trade Repositories. The Commission is requested to propose a solution for supervision of Central Counterparties by the Authority, modelled after the solution found in the Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (14).

(4a) The International Monetary Fund (IMF) report of 16 April 2010 entitled ‘A Fair and Substantial Contribution by the Financial Sector’, written at the request of the G20 Pittsburgh summit, stated that ‘the cost of financial sector failures should be contained and covered by a Financial Stability Contribution (FSC) linked to a credible and effective resolution mechanism. If defined properly, resolution mechanisms will avoid governments in the future being forced to bail out institutions too important, too big or too interconnected to fail’.

(4b) The Commission Communication of 3 March 2010 entitled ‘Europe 2020’ also declared that a crucial priority in the short term would be to set ‘to better prevent and if needed manage possible financial crises, and that–taking into account the specific responsibility of the financial sector in the current crisis–will look also into adequate contributions from the financial sector’.

(4c) The European Council stated clearly on 25 March 2010 that ‘progress is particularly needed on issues such as … systemic institutions, financing instruments for crisis management.’

(4d) The European Council finally expressed on 17 June 2010 that ‘Member States should introduce systems of levies on financial institutions to ensure fair burden sharing and to set incentives to contain systemic risk. Such levies should be part of a credible resolution framework’.

(5) The financial and economic crisis has created real and serious risks to the stability of the financial system and the functioning of the internal market. Restoring and maintaining a stable and reliable financial system is an absolute prerequisite to preserving trust and coherence in the internal market, hence to preserve and improve the conditions for the establishment of a fully integrated and functioning internal market in the field of financial services. Moreover, deeper and more integrated financial markets offer better opportunities for financing and risk diversification, and thus help to improve the capacity of the economies to absorb shocks.

(6) The Union has reached the limits of what can be done with the present status of the Committees of European Supervisors ▐. The Union cannot remain in a situation where there is no mechanism to ensure that national supervisors arrive at the best possible supervisory decisions for cross-border institutions; where there is insufficient cooperation and information exchange between national supervisory authorities; where joint action by national authorities requires complicated arrangements to take account of the patchwork of regulatory and supervisory requirements; where national solutions are most often the only feasible option in responding to European problems, where different interpretations of the same legal text exist. The European System of Financial Supervision (ESFS) should be designed to overcome these deficiencies and provide a system that is in line with the objective of a stable and single Union financial market for financial services, linking national supervisors into a strong Union network.

(7) The ESFS should be an integrated network of national and Union supervisory authorities, leaving day-to-day supervision of financial institutions to the national level ▐. The Authority should have a leading role in the colleges of supervisors supervising cross-border financial market participants and clear supervisory norms for them should be defined. The Authority should pay special attention to financial market participants that may pose a systemic risk since their failure could jeopardise the stability of the Union financial system, where a national authority has failed to exercise its powers. Greater harmonisation and the coherent application of rules for financial institutions and markets across the Union should also be achieved. In addition to the Authority ▐, a European Supervisory Authority (European Insurance and Occupational Pensions Authority) and a European Supervisory Authority (European Banking Authority) as well as a European Supervisory Authority (Joint Committee) should be established. A European Systemic Risk Board should form part of the EFSF .

(8) The European Supervisory Authority should replace the Committee of European Banking Supervisors established by Commission Decision 2009/78/EC (15), the Committee of European Insurance and Occupational Pensions Supervisors established by Commission Decision 2009/79/EC (16) and the Committee of European Securities Regulators established by Commission Decision 2009/77/EC (17), and assume all of the tasks and competences of those committees including the continuation of on-going work and projects, where appropriate . The scope of each Authority's action should be clearly defined ▐. Where institutional reasons and the responsibilities assigned in the Treaty on the Functioning of the European Union (TFEU) so require the Commission should also be part of the network of supervisory activities.

(9) The ▐ Authority ▐ should act with a view to improving the functioning of the internal market, ▐ in particular by ensuring a high, effective and consistent level of regulation and supervision taking account of the varying interests of all Member States, and the different nature of financial market participants. The Authority should protect public values like the stability of the financial system, the transparency of markets and financial products and the protection of depositors and investors. The Authority should also prevent regulatory arbitrage and guarantee a level playing field, and strengthen international supervisory coordination, for the benefit of the economy at large, including financial market participants and other stakeholders, consumers and employees. Its tasks should also include promoting supervisory convergence and providing advice to the EU institutions in the areas of securities and markets regulation and supervision, and related corporate governance and financial reporting issues. The Authority should also be entrusted with a general oversight responsibility for existing and new financial products/types of transactions.

(9a) The Authority shall take due account of the impact of its activities on competition and innovation within the internal market, the Union’s global competitiveness, financial inclusion, and the Union's new strategy for jobs and growth.

(9b) In order to fulfil its objectives, the Authority should have legal personality as well as administrative and financial autonomy. The Authority should be granted ‘powers to address compliance with laws in particular those related with systemic risk and cross-border risks’ (Basel Committee on Banking Supervision).

(9c) Systemic risk is defined by international authorities (IMF, FSB, BIS) as ‘a risk of disruption to financial services that is (i) caused by an impairment of all or parts of the financial system and (ii) has the potential to have serious negative consequences for the real economy All types of financial intermediaries, markets and infrastructure can potentially be systematically important to some degree’.

(9d) Cross-border risk, according to those institutions, includes all risks caused by economic imbalances or financial failures in all or parts of the Union that have the potential to have significant negative consequences for the transactions between economic operators of two or more Member States, for the functioning of the internal market or for the public finances of the Union or any of its Member States.

(10) The Court of Justice of the European Union in its judgement on 2 May 2006 ▐ (United Kingdom/European Parliament and Council) held that: ‘nothing in the wording of Article 95 TEC [now Article 114 TFEU] implies that the addressees of the measures adopted by the Community legislature can only be the individual Member State. The legislature may deem it necessary to provide for the establishment of a Community body responsible for contributing to the implementation of a process of harmonization in situations where, in order to facilitate the uniform implementation and application of acts based on that provision, the adoption of non-binding supporting and framework measures seems appropriate’ (18). The purpose and tasks of the Authority - assisting competent national supervisory authorities in the consistent interpretation and application of Union rules and contributing to financial stability necessary for financial integration - are closely linked to the objectives of the Union acquis concerning the internal market for financial services. The Authority should therefore be established on the basis of Article 114 TFEU .

(11) The legal acts which lay down the tasks for competent authorities of Member States, including cooperating with each other and with the Commission, are the following: Directive 97/9/EC of the European Parliament and of the Council of 3 March 1997 on investor-compensation schemes (19), Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems, (20) Directive 2001/34/EC of the European Parliament and of the Council of 28 May 2001 on the admission of securities to official stock exchange listing and on information to be published on those securities (21), Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on financial collateral arrangements (22), Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate (23), Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider dealing and market manipulation (market abuse) (24), Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC (25), Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids (26), Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (27), Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC (28), Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (29), Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services (30), Directive 2006/49/EC of the European Parliament and the Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions (recast) (31), without prejudice to the competence of the European Banking Authority in terms of prudential supervision, Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 concerning Undertakings for Collective Investment in Transferable Securities (32), Directive … (future AIFM Directive), and Regulation … (future CRA Regulation), including all Commission directives, regulations and decisions based on these acts, and of any further Community act which confers tasks on the Authority.

(12) The term financial market participant should cover a diverse range of participants who are subject to Community legislation in this area. It may include both legal persons and individuals. It can include for example investment firms, UCITS and their management companies, alternative investment fund managers, market operators, clearing houses, settlement systems, credit rating agencies, issuers, offerors, investors, persons who control or have an interest in participants, persons involved in the management of participants as well as other persons in relation to whom a requirement in the legislation applies. It should also include financial institutions such as credit institutions and insurance companies when engaging in activities covered by Community legislation in this area. Competent authorities in the EU and of third countries as well as the Commission do not fall within this definition.

(13) It is desirable that the Authority promote a consistent approach in the area of investor compensation schemes to ensure a level playing field and the equitable treatment of investors across the Union . As investor compensation schemes are subject to oversight in their Member States rather than regulatory supervision, it is appropriate that the Authority should be able to exercise its powers under this Regulation in relation to the investor compensation scheme itself and its operator ▐. The role of the Authority should be reviewed once a European Investors Guarantee fund is established.

(14) There is a need to introduce an effective instrument to establish harmonised regulatory technical standards in financial services to ensure, also through a single rulebook, a level playing field and an adequate protection of depositors, investors and consumers across Europe. As a body with highly specialised expertise, it is efficient and appropriate to entrust the Authority, in areas defined by Union law, with the elaboration of draft regulatory technical standards, which do not involve policy choices. The Commission should endorse those regulatory and implementing technical standards in accordance with Article 290 TFEU in order to give them binding legal effect. ▐

(15) The Commission should endorse those draft regulatory technical standards in order to give them binding legal effect. They will be subject to amendment only in very restricted and extraordinary circumstances, provided that the Authority is the one in close contact with and acknowledging the daily work of financial markets. They would be subject to amendment if, for example, the draft regulatory standards were incompatible with Union law, would not respect the principle of proportionality or would run counter to the fundamental principles of the internal market for financial services as reflected in the acquis of Community financial services legislation. The Commission should not change the content of the technical standards prepared by the Authority without prior coordination with the Authority. To ensure a smooth and expeditious adoption process for those standards, the Commission should be subject to a time limit for its decision on the endorsement .

(15a) The Commission should also be empowered to implement legal acts as stated in Article 291 TFUE.

(15b) Regulatory and implementing technical standards have to take into account the principle of proportionality, i. e. the requirements laid down in these standards should be proportionate to the nature, scale and complexity of the risks inherent in the business of the financial institution concerned.

(16) In areas not covered by regulatory technical standards, the Authority should have the power to issue ▐ guidelines and recommendations on the application of Union legislation. In order to ensure transparency and strengthen compliance by national supervisory authorities with those guidelines and recommendations, national authorities should be obliged to publish the reasons where they do not comply with those guidelines and recommendations in order to ensure full transparency towards market participants .

(17) Ensuring the correct and full application of Union law is a core prerequisite for the integrity, transparency, efficiency and orderly functioning of financial markets, the stability of the financial system, and for neutral conditions of competition for financial institutions in the Union . A mechanism should therefore be established whereby the Authority addresses instances of non-application or incorrect ▐ application and thus a breach of Union law. This mechanism should apply in areas where Community legislation defines clear and unconditional obligations.

(18) To allow for a proportionate response to instances of incorrect or insufficient application of Community law, a three-step mechanism should apply. At the first level, the Authority should be empowered to investigate alleged incorrect or insufficient application of Community law obligations by national authorities in their supervisory practice, concluded by a ▐ recommendation. Where the competent national authority does not follow the recommendation, the Commission should be empowered to issue a formal opinion taking into account the Authority’s recommendation, requiring the competent authority to take the actions necessary to ensure compliance with Union law.

(19) Where the national authority does not comply with the recommendation, within a deadline fixed by the Authority , the Authority should ▐ address a Decision without delay to the national supervisory authority concerned in order to ensure compliance with Union law, creating direct legal effects which can be invoked before national courts and authorities and enforced under Article 258 TFEU .

(20) To overcome exceptional situations of persistent inaction by the competent authority concerned, the Authority should be empowered, as a last resort, to adopt decisions addressed to individual financial institutions. This power should be limited to exceptional circumstances in which a competent authority does not comply with the formal opinion addressed to it and in which Union law is directly applicable to financial institutions by virtue of existing (33) or future EU Regulations. In this regard, the European Parliament and the Council are looking forward to the implementation of the programme of the Commission for 2010, in particular as regards the proposal on the reform of the Capital Requirements Directive.

(21) Serious threats to the orderly functioning and integrity of financial markets or the stability of the financial system in the European Union require a swift and concerted response at Union level. The Authority should therefore be able to require national supervisory authorities to take specific actions to remedy an emergency situation. Bearing in mind the sensitivity of the issue, the power to determine the existence of an emergency situation ▐ should be conferred on the Commission at its own initiative or at the request of the European Parliament, the Council, the ESRB, or the Authority. Where the European Parliament, the Council, the ESRB or the European Supervisory Authority (ESA) deem that the existence of an emergency situation could be in the offing, they should contact the Commission. In this process, due care of confidentiality is of the outmost importance. If the Commission determines the existence of an emergency situation, it should duly inform the European Parliament and the Council.

(22) In order to ensure efficient and effective supervision and a balanced consideration of the positions of the competent authorities in different Member States, the Authority should be able to settle disagreements between those competent authorities with binding effect, including within colleges of supervisors. A conciliation phase should be provided for, during which the competent authorities may reach an agreement. Where such an agreement is not reached, the Authority shall require the competent authorities concerned to take specific action or to refrain from action in order to settle the matter in order to ensure compliance with EU legislation, with binding effects for the competent authorities concerned. In the event of inaction by the national supervisory authorities concerned, the Authority should be empowered to adopt, as a last resort, decisions directly addressed to financial institutions in areas of Union law directly applicable to them.

(22a) The crisis has proven that the mere cooperation between national authorities whose jurisdiction end at the national border is clearly inadequate to supervise financial institutions that operate cross border.

(22b) Furthermore, ‘the current arrangements, combining branch passporting rights, home country supervision, and purely national deposit insurance, are not sound basis for the future regulation and supervision of European cross-border retail banks’ (Turner Review).

(22c) As the Turner Review concluded, ‘sounder arrangements require either increased national powers, implying a less open single market, or a greater degree of European integration’.

(22d) The ‘national’ solution implies giving the host country the right to oblige foreign institutions to act only through the subsidiaries and not through branches and to oversee the capital and liquidity of banks operating in their country, which would amount to more protectionism.

(22e) The ‘European’ solution calls for the reinforcement of the Authority in the College of Supervisors and for a strengthening in supervision of financial institutions that pose systemic risk.

(23) Colleges of supervisors play an important role in the efficient, effective and consistent supervision of financial institutions operating across borders. The Authority should play a leading role and have full participation rights in colleges of supervisors with a view to streamlining the functioning of and the information exchange process in colleges and to foster convergence and consistency across colleges in the application of Union law. As the de Larosière Report states ‘competition distortions and regulatory arbitrage stemming from different supervisory practices must be avoided, because they have the potential of undermining financial stability – inter alia by encouraging a shift of financial activity to countries with lax supervision. The supervisory system has to be perceived as fair and balanced’.

(23a) The Authority and national supervisors should strengthen supervision of financial institutions meeting the systemic risk criteria since their failure may jeopardise the stability of the Union Financial System and damage the real economy.

(23b) Systemic risk criteria should be identified taking into account international standards, in particular those established by the Financial Stability Board, the International Monetary Fund, the International Association of Insurance Supervisors and the G-20. Interconnectedness, substitutability and timing are the most commonly used criteria for the identification of systemic risk.

(23c) A framework for dealing with distressed institutions should be established in order to stabilise or wind them down since ‘it has been clearly demonstrated that the stakes in a banking crisis are high for government and society at large because such a situation has the potential to jeopardise financial stability and the real economy’ (de Larosière Report). The Commission should make appropriate proposals for the establishment of a new framework for financial crisis management. The key elements of crisis management are a common set of rules and financial resolution vehicles (execution and funding to deal with the crisis of large, cross-border and/or interconnected institutions).

(23d) A European Deposit Guarantee Fund should be established to ensure the co-responsibility of cross-border financial institutions, protect Union depositors’ interests and reduce the cost to tax payers of a systemic financial crisis. An EU-level fund seems to be the most efficient way to protect depositors’ interests and the best defence against competitive distortions. It is obvious however that EU approaches are more complex and some others are keen to keep their national schemes. At very minimum therefore, the Authority must harmonise the most important features of national scheme. It may also ensure that financial institutions are required to pay to only one scheme.

(23e) The European Securities and Market Stability Fund should finance the orderly winding-up or rescue interventions of financial institutions facing difficulties when those could menace financial stability of the Union's single financial market. The Fund should be financed through adequate contributions from the financial sector. The contributions to the Fund should replace those made to the national funds of similar nature.

(24) The delegation of tasks and responsibilities can be a useful instrument in the functioning of the network of supervisors in order to reduce the duplication of supervisory tasks, foster cooperation and thereby streamline the supervisory process as well as reduce the burden imposed on financial institutions , particularly for those financial institutions that do not have a Union dimension . The Regulation should therefore provide a clear legal basis for such delegation. Delegation of tasks means that tasks are carried out by another supervisory authority instead of the responsible authority, while the responsibility for supervisory decisions remains with the delegating authority. By delegation of responsibilities one national supervisory authority, the delegatee, should be able to decide upon a certain supervisory matter in its name in lieu of the Authority or of another national supervisory authority. Delegations should be governed by the principle of allocating supervisory competence to a supervisor which is well placed to take action in the subject matter. A reallocation of responsibilities would be appropriate , for example, for reasons of economies of scale or scope, of coherence in group supervision, and of optimal use of technical expertise among national supervisory authorities. Relevant Union legislation may further specify the principles for reallocation of responsibilities upon agreement. The Authority should facilitate and monitor delegation agreements between national supervisory authorities by all appropriate means. It should be informed in advance of intended delegation agreements to be able to express an opinion where appropriate. It should centralise the publication of such agreements to ensure timely, transparent and easily accessible information about agreements for all parties concerned. It should identify and disseminate best practices regarding delegation and delegation agreements.

(25) The Authority should actively foster supervisory convergence across the Union with the aim of establishing a common supervisory culture.

(26) Peer reviews are an efficient and effective tool for fostering consistency within the network of financial supervisors. The Authority should therefore develop the methodological framework for such reviews and conduct them on a regular basis. Reviews should focus not only on convergence of supervisory practices but also on the capacity of supervisors to achieve high quality supervisory outcomes as well as the independence of competent authorities. The outcome of peer reviews should be made public and best practices should be identified and also made public.

(27) The Authority should actively promote a coordinated Union supervisory response, in particular to ensure the orderly functioning and integrity of financial markets or the stability of the financial system in the European Union . In addition to its powers for action in emergency situations, it should therefore be entrusted with a general coordination function within the ESFS . The smooth flow of all relevant information between competent authorities should be a particular focus of the Authority's actions.

(28) In order to safeguard financial stability it is necessary to identify, at an early stage, trends, potential risks and vulnerabilities stemming from the micro-prudential level, across borders and across sectors. The Authority should monitor and assess such developments in the area of its competence and, where necessary, inform the European Parliament, the Council, the Commission, the other European Supervisory Authorities and the ESRB on a regular and, as necessary, ad hoc basis. The Authority should also initiate and coordinate Union -wide stress tests to assess the resilience of financial institutions to adverse market developments, ensuring an as consistent as possible methodology is applied at the national level to such tests. In order properly to perform its functions, the Authority should conduct economic analyses of the markets and the impact of potential market developments.

(29) Given the globalisation of financial services and the increased importance of international standards, the Authority should represent the European Union in relation to dialogue and cooperation with supervisors in third countries .

(30) The Authority should serve as an independent advisory body to the European Parliament, the Council, and the Commission in the area of its competence. It should be able to provide its opinion on the prudential assessment of mergers and acquisitions under Directive 2004/39/EC, amended by 2007/44/EC (34).

(31) In order to effectively carry out its duties, the Authority should have the right to request all necessary information relating to prudential supervision . To avoid duplication of reporting obligations for financial market participants, that information should normally be provided by the national supervisory authorities who are closest to financial markets and market participants and take into account already existing statistics. . However, as a last resort , the Authority should be able to address a duly justified and reasoned request for information directly to a financial market participant where a national competent authority does not or cannot provide such information in a timely fashion. Member States’ authorities should be obliged to assist the Authority in enforcing such direct requests. In this context, the work on common reporting formats is essential.

(31a) The measures for the collection of information should be without prejudice to the legal framework of the European Statistical System (ESS) and the European System of Central Banks (ESCB) in the field of statistics. This Regulation should therefore be without prejudice to Regulation (EC) No 223/2009 of the European Parliament and of the Council of 11 March 2009 on European statistics (35) and to Council Regulation (EC) No 2533/98 of 23 November 1998 concerning the collection of statistical information by the European Central Bank (36).

(32) Close cooperation between the Authority and the European Systemic Risk Board is essential to give full effectiveness to the functioning of the European Systemic Risk Board and the follow-up to its warnings and recommendations. The Authority and the European Systemic Risk Board should share any relevant information among each other . Data related to individual undertakings should be provided only upon reasoned request. Upon receipt of warnings or recommendations addressed by the European Systemic Risk Board to the Authority or a national supervisory authority, the Authority should ▐ ensure follow-up.

(33) ▐ The Authority should consult interested parties on regulatory standards, guidelines and recommendations and provide them with a reasonable opportunity to comment on proposed measures. Before adopting draft regulatory standards, guidelines and recommendations the Authority should carry out an impact study. For reasons of efficiency, a Securities and Markets Stakeholder Group should be established for that purpose, representing in balanced proportions Union financial market participants (representing the diverse models and sizes of financial institutions and businesses, (including as appropriate institutional investors and other financial institutions which themselves use financial services), SME's, trade unions , academics and consumers and other retail users of financial services, including SMEs. The Securities and Markets Stakeholder Group should actively work as an interface with other user groups in the financial services area established by the Commission or Union legislation.

(33a) Non-profit organisations are marginalised in the debate on the future of financial services and in the corresponding decision making process in comparison to well-funded and well-connected industry representatives. That disadvantage should be compensated for by adequate funding of their representatives in the Securities and Markets Stakeholder Group.

(34) Member States have a core responsibility for ensuring coordinated crisis management and preserving financial stability in crisis situations , in particular with regard to stabilising and resolving individual ailing financial market participants. Their actions should be closely coordinated with the framework and the principles of the EMU. Measures by the Authority in emergency or settlement situations affecting the stability of a financial institution should not impinge significantly on the fiscal responsibilities of Member States. A mechanism should be established whereby Member States may invoke this safeguard and ultimately bring the matter before the Council for a decision. It is appropriate to confer on the Council a role in this matter given the particular responsibilities of the Member States in this respect.

(34a) Within three years from the entry into force of a regulation establishing such a mechanism, clear and sound guidance on when the safeguard is triggered by Member States should be laid down at Union level by the Commission on the basis of the experience acquired. Member States’ use of the safeguard clause should be assessed against that guidance.

(34b) Without prejudice to the particular responsibilities of the Member States in crisis situations, if a Member State chooses to invoke the safeguard, it should inform the European Parliament at the same time as the Authority, the Council and the Commission. Furthermore, the Member State should explain its reasons for invoking the safeguard. The Authority should, in cooperation with the Commission, set out the next steps to be taken.

(35) In its decision-making procedures, the Authority should be bound by Community rules and general principles on due process and transparency. The right to hear the addressees of the Authority's decisions should be fully respected. The Authority's acts form an integral part of Union law.

(36) A Board of Supervisors composed of the heads of the relevant competent authority in each Member State, and chaired by the Chairperson of the Authority, should be the principal decision-making organ of the Authority. Representatives of the Commission, the European Systemic Risk Board , and the ▐ European Insurance and Pensions Authority and the European Banking Authority should participate as observers. Members of the Board of Supervisors should act independently and only in the Union's interest. For acts of a general nature, including those related to the adoption of regulatory technical standards, guidelines and recommendations as well as budgetary matters, it is appropriate to apply the rules on qualified majority as laid down in Article 16 TFEU , whereas for all other decisions simple majority of members should apply. Cases concerning the settlement of disagreements between national supervisory authorities should be examined by a restricted panel.

(36a) As a general rule, the Board of Supervisor should take its decisions with simple majority according to the principle of one man-one vote. However for acts relating to the adoption of technical standards, guidelines and recommendations as well as budgetary matters, it is appropriate to apply the rules of qualified majority as laid down in the Treaty on European Union, in the TFEU and in the Protocol (No 36) on transitional provisions attached to thereto. Cases concerning the settlement of disagreements between national supervisory authorities should be examined by a restricted, objective panel, composed of members who are not representatives of the competent authorities which are parties to the disagreement, nor have any interest in the conflict or direct links to the competent authorities concerned. The composition of the panel should be appropriately balanced. The decision taken by the panel should be approved by the Board of Supervisors by simple majority according to the principle where each member has one vote. However, with regard to decisions taken by the consolidating supervisor, the decision proposed by the panel could be rejected by members representing a blocking minority of the votes as defined in Article 16(4) of the Treaty on European Union and in Article 3 of the Protocol No 36 on transitional provisions annexed to the Treaty on European Union and to the TFEU.

(37) A Management Board composed of the Chairperson of the Authority, representatives of national supervisory authorities and the Commission should ensure that the Authority carries out its mission and performs the tasks assigned to it. The Management Board should be entrusted with the necessary powers to, inter alia, propose the annual and multi-annual work programme, exercise certain budgetary powers, adopt the Authorities staff policy plan, adopt special provisions on the right to access to documents and adopt the annual report.

(38) A full time Chairperson, selected by the European Parliament following an open competition managed by the Commission and the subsequent drawing up of a short list for the Commission , should represent the Authority. The management of the Authority should be entrusted to an Executive Director, who should have the right to participate in meetings of the Board of Supervisors and the Management Board without the right to vote.

(39) In order to ensure cross-sectoral consistency in the activities of the European Supervisory Authorities, those authorities should coordinate closely through the European Supervisory Authority (Joint Committee) (the ‘Joint Committee’) and reach common positions where appropriate. The Joint Committee of European Supervisory Authorities should coordinate the functions of the three European Supervisory Authorities in relation to financial conglomerates . Where relevant, acts also falling within the area of competence of the European Supervisory Authority ( Insurance and Occupational Pensions ) or the European Supervisory Authority ( Banking ) should be adopted in parallel by the European Supervisory Authorities concerned. The Joint Committee should be chaired for a 12-month term on a rotating basis by the Chairpersons of the three European Supervisory Authorities. The Chairperson of the Joint Committee should be a Vice-Chair of the European Systemic Risk Board. The Joint Committee should have a permanent secretariat, staffed on secondment from the three European Supervisory Authorities to allow for informal information sharing and the development of a common cultural approach across the three European Supervisory Authorities.

(40) It is necessary to ensure that the parties affected by decisions adopted by the Authority may exercise the necessary remedies. To effectively protect the rights of parties and for reasons of procedural economy, where the Authority has decision-making powers, parties should be granted a right of appeal to a Board of Appeal. For reasons of efficiency and consistency, the Board of Appeal should be a joint body of the three European Supervisory Authorities, independent from their administrative and regulatory structures. The decision of the Board of Appeal should be subject to appeal before the Court of First Instance and the Court of Justice of the European Communities.

(41) In order to guarantee its full autonomy and independence, the Authority should be granted an autonomous budget with revenues mainly from obligatory contributions from national supervisory authorities and from the General Budget of the European Union through a separate budget section within it. Union financing of the Authority is subject to an agreement by the budgetary authority in accordance with Point 47 of the Interinstitutional Agreement between the European Parliament, the Council and the Commission of 17 May 2006 on budgetary discipline and sound financial management (37) (IIA). The Union budgetary procedure should be applicable as far as the European Union contribution is concerned. The auditing of accounts should be undertaken by the Court of Auditors. The overall budget is subject to the discharge procedure.

(42) Regulation (EC) No 1073/1999 of the European Parliament and of the Council of 25 May 1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF) (38) should apply to the Authority. The Authority should also accede to the Inter-institutional Agreement of 25 May 1999 between the European Parliament, the Council of the European Union and the Commission of the European Communities concerning internal investigations by the European Anti-Fraud Office (OLAF) (39).

(43) In order to ensure open and transparent employment conditions and equal treatment of staff, the Staff Regulations of Officials of the European Communities and the Conditions of Employment of Other Servants of the European Communities (40) should apply to the staff of the Authority.

(44) It is essential that business secrets and other confidential information are protected. The confidentiality of information made available to the Authority and exchanged in the network should be subject to stringent and effective confidentiality rules .

(45) The protection of individuals with regard to the processing of personal data is governed by Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (41) and by Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data (42), which are fully applicable to the processing of personal data for the purposes of this Regulation.

(46) In order to ensure the transparent operation of the Authority, Regulation (EC) No 1049/2001 of the European Parliament and of the Council of 30 May 2001 regarding public access to European Parliament, Council and Commission documents (43) should apply to the Authority.

(47) Countries which are not members of the European Union should be allowed to participate in the work of the Authority in accordance with appropriate agreements to be concluded by the Union .

(48) Since the objectives of this Regulation, namely improving the functioning of the internal market by means of ensuring a high, effective and consistent level of prudential regulation and supervision, protecting depositors and investors, protecting the integrity, efficiency and orderly functioning of financial markets, maintaining the stability of the financial system, and strengthening international supervisory coordination, cannot be sufficiently achieved by the Member States and can, therefore, by reason of 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.

(49) The Authority assumes all current tasks and powers of the Committee of European Securities Regulators. Commission Decision 2009/77/EC of 23 January 2009 establishing the Committee of European Securities Regulators should therefore be repealed, and Decision No 716/2009/EC of the European Parliament and of the Council of 16 September 2009 establishing a Community programme to support specific activities in the field of financial services, financial reporting and auditing (44), should be amended accordingly.

(50) It is appropriate to set a time limit for the application of this Regulation in order to ensure that the Authority is adequately prepared to begin operations and to ensure a smooth transition from the Committee of European Securities Regulators,

HAVE ADOPTED THIS REGULATION:

CHAPTER I

ESTABLISHMENT AND LEGAL STATUS

Article 1

Establishment and Scope of action

1. This Regulation establishes a European Supervisory Authority (European Securities and Markets Authority) (‘the Authority’).

2. The Authority shall act within the powers of this Regulation and within the scope of Directive 97/9/EC, Directive 98/26/EC, Directive 2001/34/EC, Directive 2002/47/EC, Directive 2002/87/EC, Directive 2003/6/EC, Directive 2003/71/EC, ▐ Directive 2004/39/EC, Directive 2004/109/EC, ▐ Directive 2009/65/EC, and of Directive 2006/49/EC, ▐ without prejudice to the competence of the European Supervisory Authority (European Banking Authority) in terms of prudential supervision ▐, Directive … [future AIFM Directive], and Regulation (EC) No 1060/2009 , and, to the extent that these acts apply to firms providing investment services or to collective investment undertakings marketing their units or shares and the competent authorities that supervise them, within the relevant parts of Directive 2005/60/EC and of Directive 2002/65/EC including all directives, regulations, and decisions based on these acts, and of any further Union legislative act which confers tasks on the Authority.

2a. The Authority shall also act in the field of activities covered by the legislation referred to in paragraph 2, including matters of corporate governance, auditing and financial reporting, provided that such actions by the Authority are necessary to ensure the effective and consistent application of the legislation referred to in paragraph 2.

3. The provisions of this Regulation are without prejudice to the powers of the Commission, in particular under Article 258 TFEU to ensure compliance with Union law.

4. The objective of the Authority shall be to protect the public interest by contributing to the short, medium and long-term stability and effectiveness of the financial system, for the Union economy, its citizens and businesses. The Authority shall contribute to: (i) improving the functioning of the internal market, including in particular a sound , effective and consistent level of regulation and supervision, ▐ (iii) ensuring the integrity, transparency, efficiency and orderly functioning of financial markets, (iv) ▐ strengthening international supervisory coordination (v) preventing regulatory arbitrage and contributing to equal conditions of competition, (vi) ensuring the taking of investment and other risks are appropriately regulated and supervised, and (vii) contribute to enhance customer protection. For those purposes , the Authority shall contribute to ensuring the consistent, efficient and effective application of the Union legislative acts referred to in paragraph 2 , fostering supervisory convergence and providing opinions to the European Parliament, the Council, and the Commission and undertaking economic analyses of the markets to promote the achievement of the Authority's objective .

In the exercise of the tasks conferred upon it by this Regulation, the Authority shall pay particular attention to any systemic risk posed by market participants, failure of which may impair the operation of the financial system or the real economy.

When carrying out its tasks, the Authority shall act independently and objectively and in the interest of the Union alone.

Article 1a

The European System of Financial Supervision

1. The Authority shall form part of a European System of Financial Supervision (ESFS). The main objective of the ESFS shall be to ensure that the rules applicable to the financial sector are adequately implemented, to preserve financial stability ensure confidence in the financial system as a whole and sufficient protection for the customers of financial services.

2. The ESFS shall comprise the following:

(a) the European Systemic Risk Board, for the purposes of the tasks as specified in Regulation (EU) No …/2010 (ESRB) and this Regulation;

(b) the Authority;

(c) the European Supervisory Authority (European Banking Authority) established by Regulation (EU) No …/2010 [ESMA];

(d) the European Supervisory Authority (European Insurance and Occupational Pensions Authority) established by Regulation (EU) No …/2010 [EIOPA];

(e) the European Supervisory Authority (Joint Committee) for the purposes of carrying out the tasks as specified in Articles 40 to 43 (the ‘Joint Committee’);

(f) the authorities in the Member States referred to in Article 2(2) of Regulation (EU) No …/2010 [ESMA], Regulation (EU) No …/2010 [EIOPA] and Regulation (EU) No …/2010 [EBA];

(g) the Commission, for the purposes of carrying out the tasks referred to in Articles 7 and 9.

3. The Authority shall cooperate regularly and closelywith the European Systemic Risk Board as well as with the European Supervisory Authority (Insurance and Occupational Pensions) and the European Supervisory Authority (Banking) through the Joint Committee, ensuring cross-sectoral consistency of work and arrive at joint positions in the area of supervision of financial conglomerates and on other cross-sectoral issues.

4. In accordance with the principle of sincere cooperation under Article 4(3) of the Treaty on European Union, the parties to the ESFS shall cooperate with trust and full mutual respect, in particular in ensuring the flow of appropriate and reliable information flows between them.

5. Those supervisory authorities that are party to the ESFS shall be obligated to supervise financial institutions operating in the Union in accordance with the legislative acts referred to in Article 1(2).

Article 1b

The Authorities referred to in Article 1a(2) shall be accountable to the European Parliament.

Article 2

Definitions

For the purposes of this Regulation the following definitions apply:

(1) ‘financial market participant’ means any person in relation to whom a requirement in the legislation referred to in Article 1(2) or a national law implementing such legislation applies ;

(2) ‘competent authorities’ means competent authorities and/or supervisory authorities as defined in the legislation referred to in Article 1(2). With regard to Directives 2002/65/EC and 2005/60/EC, ‘competent authorities’ means the authorities competent for ensuring compliance with the requirements of those Directives by firms providing investment services and by collective investment undertakings marketing their units or shares. Where investor compensation schemes are concerned, competent authorities means bodies which administer national compensation schemes pursuant to Directive 97/9/EC , or in the case where the operation of the investor compensation scheme is administered by a private company, the public authority supervising these schemes, pursuant to that Directive .

Article 3

Legal status

1. The Authority shall be a Union body with legal personality.

2. In each Member State, the Authority shall enjoy the most extensive legal capacity accorded to legal persons under national law. It may, in particular, acquire or dispose of movable and immovable property and be a party to legal proceedings.

3. The Authority shall be represented by its Chairperson.

Article 4

Composition

The Authority shall comprise the following:

(1) a Board of Supervisors, which shall exercise the tasks set out in Article 28;

(2) a Management Board, which shall exercise the tasks set out in Article 32;

(3) a Chairperson, who shall exercise the tasks set out in Article 33;

(4) an Executive Director, who shall exercise the tasks set out in Article 38;

(5) a Board of Appeal, as referred to in Article 44, which shall exercise the tasks set out in Article 46.

Article 5

Headquarters

The authority shall have its headquarters in Frankfurt.

It may have representations in the most important financial centres of the European Union.

CHAPTER II

TASKS AND POWERS OF THE AUTHORITY

Article 6

Tasks and Powers of the Authority

1. The Authority shall have the following tasks:

(a) contribute to the establishment of high quality common regulatory and supervisory standards and practices, in particular by providing opinions to the Union institutions and by developing guidelines, recommendations, and draft regulatory technical and implementing technical standards which shall be based on the legislative acts referred to in Article 1(2);

(b) contribute to a consistent application of Union legislative acts , in particular by contributing to a common supervisory culture, ensuring consistent, efficient and effective application of the legislative acts referred to in Article 1(2), preventing regulatory arbitrage, mediating and settling disagreements between competent authorities, ensuring effective and consistent supervision of financial market participants and ensuring a coherent functioning of colleges of supervisors and taking actions , inter alia, in emergency situations;

(c) stimulate and facilitate the delegation of tasks and responsibilities between competent authorities;

(d) cooperate closely with the ESRB, in particular by providing the ESRB with the necessary information for the achievement of its tasks and by ensuring a proper follow up to the warnings and recommendations of the ESRB;

(e) organise and conduct peer review analyses of competent authorities, including issuing advice, in order to strengthen consistency in supervisory outcomes;

(f) monitor and assess market developments in the area of its competence;

(fa) undertake economic analyses of markets to inform the discharge of the Authority's functions;

(fb) foster depositor and investor protection;

(fc) help to manage crisis of cross-border institutions that have the potential to pose a systemic risk referred to in Article 12b, leading and executing all early interventions, resolution or insolvency procedures for such institutions through its Resolution Unit as set out in Article 12c;

(g) fulfil any other specific tasks set out in this Regulation or in the Union legislative acts referred to in Article 1(2);

(ga) supervise those financial market participants that are not subject to the supervision of competent authorities;

(gb) publish on its website and regularly update information relating to its field of activities, in particular, within the area of its competence, on registered financial market participants, in order to ensure easily accessible information to the public;

(gc) take over, as appropriate, all existing and ongoing tasks from the Committee of European Securities Regulators.

2. To achieve the tasks set out in paragraph 1, the Authority shall have the powers set out in this Regulation, in particular ▐ to:

(a) develop draft regulatory technical standards in the specific cases referred to in Article 7;

(aa) develop draft implementing technical standards in the specific cases referred to in Article 7e;

(b) issue guidelines and recommendations, as laid down in Article 8;

(c) issue recommendations in specific cases, as referred to in Article 9(3);

(d) take individual decisions addressed to competent authorities in the specific cases referred to in Articles 10 and 11;

(e) take individual decisions addressed to financial market participants, in the specific cases referred to in Article 9(6), Article 10(3), and Article 11(4);

(f) issue opinions to the European Parliament, the Council, or the Commission as provided in Article 19;

(fa) collect the necessary information concerning financial market participants as provided for in Article 20;

(fb) developing common methodologies for assessing the effect of product characteristics and distribution processes on the financial position of financial market participants and on customer protection;

(fc) provide a database of registered financial market participants in the area of its competence and, where specified in the legislation referred to in Article 1(2), at a central level;

(fd) develop a regulatory standard setting out the minimum information that shall be made available to the Authority about transactions and market participants and how coordination of collection shall be carried out as well as outlining how existing national databases shall be linked in order to ensure that the Authority always can access the relevant and necessary information concerning transactions and market.

3. The Authority shall execute any exclusive supervisory powers over entities with Union -wide reach or economic activities with Union -wide reach entrusted to it in the legislative acts referred to in Article 1(2).

3a. For the purpose of exercising its exclusive supervisory powers under paragraph 3, the Authority shall have appropriate powers of investigation and enforcement as specified in the relevant legislation, as well as the possibility of charging fees. The Authority shall work in close cooperation with the competent authorities and build on their expertise, facilities and powers to carry out its tasks.

Article 6a

Consumer protection and financial activity

1. In order to foster depositors and investors protection, the Authority shall take a leading role in promoting transparency, simplicity and fairness in the market for financial products or services across the single market, including by:

(i) collecting, analysing and reporting on consumer trends,

(ii) reviewing and coordinating financial literacy and education initiatives,

(iii) developing training standards for the industry,

(iv) contributing to the development of common disclosure rules, and

(v) assess, in particular, the accessibility, availability and credit cost for households and enterprises, in particular SMEs.

2. The Authority shall monitor new and existing financial activities and may adopt guidelines and, recommendations with a view to promote the safety and soundness of markets and convergence of regulatory practice.

3. The Authority may also issue warnings in case a financial activity poses a serious threat to the objectives laid down in Article 1(4).

4. The Authority shall establish, as an integral part of the Authority, a Committee on financial innovation, which gathers all relevant competent national supervisory authorities with a view to achieving a coordinated approach to the regulatory and supervisory treatment of new or innovative financial activities and providing advice to the European Parliament, the Council and the European Commission.

5. The Authority may temporarily prohibit or restrict certain types of financial activities that threaten the orderly functioning and integrity of financial markets or the stability of the whole or part of the financial system in the Union in the cases specified and under the conditions laid down in the legislative acts referred to in Article 1(2) or if so required in the case of an emergency situation in accordance with and under the conditions laid down in Article 10.

The Authority shall review that decision at regular, timely intervals.

The Authority may also assess the need to prohibit or restrict certain types of financial activities and, where there is such a need, inform the Commission in order to facilitate the adoption of any prohibition or restriction.

Article 7

Regulatory technical standards

1. The European Parliament and the Council may delegate powers to the Commission to adopt regulatory technical standards under Article 290 TFEU in order to ensure consistent harmonisation in the areas specifically set out in ▐ legislation referred to in Article 1(2). Those standards shall be technical, not imply strategic decisions or policy choices and their content shall be delimited by the legislative acts on which they are based. Draft regulatory technical standards shall be developed by the authority and submitted to the Commission for endorsement. Where the Authority does not submit a draft to the Commission within the time limits set out in the legislation referred to in Article 1(2), the Commission may adopt a regulatory technical standard.

1a. The Authority shall ▐ conduct open public consultations on regulatory technical standards and analyse the potential related costs and benefits , unless such consultations and analyses are disproportionate in relation to the scope and impact of the regulatory technical standards concerned or in relation to the particular urgency of the matter before submitting them to the Commission. The Authority shall also request the opinion or advice of the Securities and Markets Stakeholder Group referred to in Article 22.

1b. The Commission shall upon receipt of the draft regulatory technical standard from the Authority forward them immediately to the European Parliament and the Council. The Commission may extend that period by one month. The Commission may endorse the draft technical standards only in part or with amendments where the Union interest so requires.

▐

Article 7a

Non-endorsement or amendment of draft regulatory standards

1. Where the Commission intends not to endorse the draft regulatory technical standards or to endorse them in part or with amendments, it shall send the draft regulatory technical standards back to the Authority, proposing reasoned amendments.

2. Within a period of six weeks, the Authority may amend the draft regulatory technical standards on the basis of the Commission’s proposed amendments and resubmit them to the Commission for endorsement. The Authority shall inform the European Parliament, the Council and the Commission on its decision.

3. When the Authority does not agree with the Commission's decision to reject or amend its initial proposals, the European Parliament or Council may convene the responsible Commissioner, together with the Chairman of the Authority, within one month for an ad hoc meeting of the competent committee of the European Parliament or Council to present and explain their differences.

Article 7b

Exercise of delegation

1. The powers to adopt regulatory technical standards referred to in Article 7 shall be conferred on the Commission for a period of four years following the entry into force of this Regulation. The Commission shall make a report in respect of delegated powers at the latest six months before the end of the four year period. The delegation of powers shall be automatically extended for periods of an identical duration, unless the European Parliament or the Council revokes it in accordance with Article 7c.

2. As soon as it adopts a regulatory technical standard, the Commission shall notify it simultaneously to the European Parliament and to the Council.

3. In the report referred to in Article 35(2), the Chairperson of the Authority shall inform the European Parliament and the Council of the regulatory standards that have been approved and that the competent authorities have not complied with.

Article 7c

Objections to regulatory technical standards

1. The European Parliament or the Council may object to the regulatory technical standard within a period of three months from the date of notification by the Commission. At the initiative of the European Parliament or the Council that period may be extended by another three months.

2. The regulatory technical standard shall be published in the Official Journal of the European Union and should enter into force before the expiry of that period if the European Parliament and the Council have both informed the Commission of their intention not to raise objections. If, on expiry of that period, neither the European Parliament nor the Council has objected to the regulatory technical standard it shall be published in the Official Journal of the European Union.

3. The European Parliament and the Council, as soon as the draft has been forwarded by the Commission, may adopt an anticipated and conditioned declaration of non objection that shall enter into force when the Commission adopts the regulatory standard without modifying the draft.

4. If the European Parliament or the Council objects to a regulatory technical standard, it shall not enter into force. In accordance with Article 296 TFEU, the institution which objects shall state the reasons for objecting to the delegated act.

Article 7d

Revocation of the delegation

1. The delegation of power referred to in Article 7 may be revoked by the European Parliament or by the Council.

2. The decision of revocation shall put an end to the delegation.

3. The institution which has commenced an internal procedure for deciding whether to revoke the delegation of power shall endeavour to inform the other institution and the Commission within reasonable time before the final decision is taken, indicating the regulatory technical standard powers which could be subject to revocation.

Article 7e

Implementing technical standards

1. Where the European Parliament and the Council confer powers on the Commission to adopt implementing technical standards under Article 291 TFEU where uniform conditions for implementing legally binding Union acts are needed in the areas specifically set out in legislation referred to in Article 1(2) the following shall apply:

(a) where in accordance with the above mentioned legislation Authority drafts implementing technical standards for submission to the Commission, those standards shall be technical, not include policy choices and limited to determining the conditions of application of legally binding Union acts;

(b) where the Authority does not submit a draft to the Commission within the time limits set out in the legislation referred to in Article 1(2), or where the Authority does not submit a draft to the Commission within the time limit indicated in a request addressed to the Authority by the Commission in accordance with Article 19, the Commission may adopt an implementing technical standard by means of an implementing act.

2. Before submitting them to the Commission, the Authority shall conduct open public consultations on implementing technical standards and analyse the potential related costs and benefits, unless such consultations and analyses are disproportionate in relation to the scope and impact of the technical standards concerned or in relation to the particular urgency of the matter.

The Authority shall also request the opinion or advice of the Securities and Markets Stakeholder Stakeholder Group referred to in Article 22.

3. The Authority shall submit its draft implementing technical standards to the Commission for endorsement in accordance with Article 291 TFEU and, at the same time, to the European Parliament and the Council.

4. Within three months of receipt of the draft implementing technical standards, the Commission shall decide whether to endorse the draft implementing standards. The Commission may extend that period by one month. The Commission may endorse the draft standards only in part or with amendments where the Union interest so requires.

In all cases where the Commission adopts implementing technical standards amending the draft implementing technical standard submitted by the Authority, it shall inform the European Parliament and the Council.

5. The standards shall be adopted by the Commission by means of Regulations or Decisions and published in the Official Journal of the European Union.

Article 8

Guidelines and recommendations

1. The Authority shall, with a view to establishing consistent, efficient and effective supervisory practices within the ESFS, and to ensuring the common, uniform and consistent application of Union legislation, issue guidelines and recommendations addressed to competent authorities or financial market participants.

1a. The Authority shall, where appropriate, conduct open public consultations regarding the guidelines and recommendations and analyse the potentially related costs and benefits. The Authority shall, where appropriate, also request the opinion or advice from the Securities and Markets Stakeholder Group referred to in Article 22. Such consultations, analyses opinions and advice shall be proportionate in relation to scope, nature and impact of the guidelines or recommendations.

2. The competent authorities and financial market participants shall make every effort to comply with those guidelines and recommendations.

Within two months of the issuance of a guideline or recommendation, each competent authority shall confirm that it intends to comply with that guideline or recommendation. In the event that a competent authority does not intend to comply, it shall inform the Authority stating reasons. The Authority shall publish those reasons.

Where a competent Authority does not apply a guideline or a recommendation, the Authority shall make this public.

The Authority may decide, on a case by case basis, to publish the reasons provided by a competent authority for not complying with a guideline or a recommendation. The competent authority shall receive advanced notice about such a publication .

If so required by that guideline or recommendation, financial market participants shall report annually, in a clear and detailed way, if they comply with that guideline or recommendation.

2a. In the report referred to in Article 28(4a) the Authority shall inform the European Parliament, the Council and the Commission of the guidelines and recommendations that are issued, stating which competent authority has not complied with them and outlining how the Authority intends to ensure that it follow its recommendations and guidelines in the future.

Article 9

Breach of Union law

1. Where a competent authority has not ▐applied or has applied the legislative acts referred to in Article 1(2) in a way which appears to be a breach of Union law , including the regulatory technical and implementing technical standards established in accordance with Articles 7 and 7e , in particular by failing to ensure that a financial market participant satisfies the requirements laid down in that legislation, the Authority shall have the powers set out in paragraphs 2, 3 and 6 of this Article.

2. Upon request from one or more competent authorities, from the Commission , from the European Parliament, the Council or the Securities and Markets Stakeholder Group, or on its own initiative and after having informed the competent authority concerned, the Authority may investigate the alleged breach or non-application of Union law.

2a. Without prejudice to the powers laid down in Article 20, the competent authority shall , without delay provide the Authority with all information which the Authority considers necessary for its investigation ▐.

3. The Authority may, at the latest within two months from initiating its investigation, address to the competent authority concerned a recommendation setting out the action necessary to comply with Union law.

The competent authority shall, within ten working days of the receipt of the recommendation, inform the Authority of the steps it has taken or intends to take to ensure compliance with Community law.

4. Where the competent authority has not complied with Union law within one month from receipt of the Authority's recommendation, the Commission may, after having been informed by the Authority or on its own initiative, issue a formal opinion requiring the competent authority to take the action necessary to comply with Union law. The Commission’s formal opinion shall take into account the Authority’s recommendation .

The Commission shall issue such a formal opinion no later than three months from the adoption of the recommendation. The Commission may extend this period by one month.

▐

The Authority and the competent authorities shall provide the Commission with all necessary information.

5. The competent authority shall, within ten working days of receipt of the formal opinion referred to in paragraph 4, inform the Commission and the Authority of the steps it has taken or intends to take to comply with the Commission's formal opinion .

6. Without prejudice to the powers of the Commission under Article 258 TFEU , where a competent authority does not comply with the formal opinion referred to in paragraph 4 ▐ within the period of time specified therein, and where it is necessary to remedy in a timely manner the non compliance ▐ in order to maintain or restore neutral conditions of competition in the market or ensure the orderly functioning and integrity of the financial system, the Authority may, where the relevant requirements of the legislation referred to in Article 1(2) are directly applicable to financial market participants pursuant to the legislative acts referred to in Article 1(2) , adopt an individual decision addressed to a financial market participants requiring the necessary action to comply with its obligations under Union law including the cessation of any practice.

The decision of the Authority shall be in conformity with the formal opinion issued by the Commission pursuant to paragraph 4.

7. Decisions adopted under paragraph 6 shall prevail over any previous decision adopted by the competent authorities on the same matter.

When taking action ▐ in relation to issues which are subject to a formal opinion pursuant to paragraph 4 or a decision pursuant to paragraph ▐ 6, the competent authorities shall comply with the formal opinion or the decision, as the case may be.

7a. In the Report referred to in Article 28(4a), the Authority shall set out which competent authorities and financial market participants have not complied with the formal opinions and decisions referred to in paragraphs 4 and 6.

Article 10

Action in emergency situations

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 European Union , the Authority shall actively facilitate and, where deemed necessary, coordinate any actions undertaken by the relevant national competent supervisory authorities .

In order to be able to perform this 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 national competent supervisory authorities.

1a. The Commission may, on its own initiative or at the request of the European Parliament, the Council, the ESRB or the Authority, adopt a decision addressed to the Authority, determining the existence of an emergency situation for the purposes of this Regulation. The Commission shall review that decision at monthly intervals and in any event once a month and shall declare the discontinuation of the emergency situation as soon as appropriate.

If the Commission determines the existence of an emergency situation, it shall duly inform the European Parliament and the Council without delay.

2. Where the Commission has adopted a decision pursuant to paragraph 1a, and in exceptional circumstances where co-ordinated action by national authorities is necessary to respond to adverse developments which may jeopardise the orderly functioning and integrity of financial markets or the stability of the whole or part of the financial system in the European Union , the Authority may adopt individual decisions requiring competent authorities to take the necessary action in accordance with the legislation referred to in Article 1(2) to address such developments by ensuring that financial market participants and competent authorities satisfy the requirements laid down in that legislation.

3. Without prejudice to the powers of the Commission under Article 258 TFEU , where a competent authority does not comply with the decision of the Authority referred to in paragraph 2 within the period laid down therein, the Authority may, where the relevant requirements laid down in the legislative acts referred to in Article 1(2) are directly applicable to financial market participants, adopt an individual decision addressed to a financial market participant requiring the necessary action to comply with its obligations under that legislation, including the cessation of any practice.

4. Decisions adopted under paragraph 3 shall prevail over any previous decision adopted by the competent authorities on the same matter.

Any action by the competent authorities in relation to issues which are subject to a decision pursuant to paragraph 2 or 3 shall be compatible with those decisions.

Article 11

Settlement of disagreements between competent authorities

1. Without prejudice to the powers laid down in Article 9, where a competent authority disagrees on the procedure or content of an action or inaction by another competent authority in areas where the legislative acts referred to in Article 1(2) requires cooperation, coordination or joint decision making by competent authorities from more than one Member State, the Authority, on its own initiative or at the request of one or more of the competent authorities concerned, shall take the lead in assisting the authorities in reaching an agreement in accordance with the procedure set out in paragraphs 2 to 4 .

2. The Authority shall set a time limit for conciliation between the competent authorities taking into account any relevant time periods specified in the legislative acts referred to in Article 1(2) and the complexity and urgency of the matter. At that stage the Authority shall act as a mediator.

3. If, at the end of the conciliation phase, the competent authorities concerned have failed to reach an agreement, the Authority shall in accordance with the procedure set out in the third subparagraph of Article 29(1) take a decision requiring to settle the disagreement and to require them to take specific action in compliance with Union law with binding effects on the competent authorities concerned .

4. Without prejudice to the powers of the Commission under Article 258 TFEU , where a competent authority does not comply with the decision of the Authority, and thereby fails to ensure that a financial market participant complies with requirements directly applicable to it by virtue of the legislative acts referred to in Article 1(2), the Authority shall adopt an individual decision addressed to a financial market participant requiring the necessary action to comply with its obligations under Community law, including the cessation of any practice.

4a. Decisions adopted under paragraph 4 shall prevail over any previous decision adopted by the competent authorities on the same matter. Any action by the competent authorities in relation to facts which are subject to a decision pursuant to paragraph 3 or 4 shall be compatible with those decisions.

4b. In the Report referred to in 35(2), the Chairperson shall set out the disagreements between competent authorities, the agreements reached and the decision taken to settle such disagreements.

Article 11a

Settlement of disagreements between competent authorities across sectors

The Joint Committee shall, in accordance with the procedure laid down in Article 11 and article 42, settle cross sectoral disagreements that may arise between one or more competent authorities as defined in Article 2(2) of this Regulation and of Regulation (EU) No …/2010 [EBA] and of Regulation (EU) No …/2010 [EIOPA].

Article 12

Colleges of supervisors

1. The Authority shall contribute to promote and monitor the efficient effective and consistent functioning of the colleges of supervisors referred to in Directive 2006/48/EC and foster the coherence of the application of Union law across the colleges. Staff from the authority shall be able to participate in any activities, including on-site examinations, carried out jointly by two or more competent authorities.

2. The Authority shall lead the colleges of supervisors as it deems appropriate. For that purpose it shall be considered a ‘competent authority’ within the meaning of the relevant legislation. It shall, at least:

(a) collect and share all relevant information in going concern and emergency situations in order to facilitate the work of the colleges of supervisors and establish and manage a central system to make such information accessible to the competent authorities in the colleges of supervisors;

(b) initiate and coordinate Union-wide stress tests to assess the resilience of financial institutions, in particular of those identified in Article 12b, to adverse market developments, ensuring an as consistent as possible methodology is applied at the national level to such tests;

(c) plan and lead supervisory activities in going concern as well as in emergency situations, including evaluating the risks to which financial institutions are or might be exposed; and

(d) oversee the tasks carried out by the competent authorities.

3a. The Authority may issue regulatory and implementing standards, guidelines and recommendations adopted under Articles 7, 7e and 8 to harmonise supervisory functioning and best practices adopted by the colleges of supervisors. The authorities shall approve written arrangements for the functioning of each college in order to ensure convergent functioning between all of them.

3b. A legally binding mediation role should allow the Authority to solve disputes between competent authorities following the procedure set up on Article 11. Where no agreement can be reached within the relevant college of supervisors, the Authority may take supervisory decisions directly applicable to the institution concerned.

Article 12a

General provisions

1. The Authority shall pay special attention to and address risks of disruption in financial services that (i) is caused by an impairment of all or parts of the financial system and (ii) has the potential to have serious negative consequences for internal market and the real economy (systemic risk). All types of financial intermediaries, markets and infrastructure can potentially be systematically important to some degree.

2. The Authority, in collaboration with the European Systemic Risk Board, shall develop a common set of quantitative and qualitative indicators (risk dashboard), which will serve as the basis to assign a supervisory rating to cross-border financial market participants identified in Article 12b. That rating shall be reviewed on a regular basis, to take into account material changes of the risk profile of an institution. The supervisory rating shall be a critical element for the decision to directly supervise or intervene in an ailing institution.

3. Without prejudice to legislative acts referred to in Article 1(2), the Authority shall propose, as necessary, additional draft regulatory and implementing standards as well as guidelines and recommendations for institutions identified in Article 12b.

4. The Authority shall exert supervision of cross-border institutions that may pose a systemic risk as established in Article 12b. In those cases, the Authority shall act through the competent authorities.

5. The Authority shall establish a Resolution Unit with a mandate to put in practice the clearly defined governance and modus operandi of crisis management from early intervention to resolution and insolvency and lead such procedures.

Article 12b

Identification of cross border financial market participants that potentially could pose a systemic risk

1. The Board of Supervisors, following consultation of the ESRB, may, in accordance with the procedure set out in Article 29(1), identify cross-border financial market participants that, due to the systemic risk they may pose need to be subject to direct supervision by the Authority or placed under the Resolution Unit referred to in Article 12c.

2. The criteria for identifying such financial market participants shall be consistent with the criteria established by the FSB, the IMF and the BIS.

Article 12c

Resolution Unit

1. The Resolution Unit shall preserve financial stability and minimise the contagion effect of distressed institutions identified in Article 12b to the rest of the system and the economy at large and limit the cost to taxpayers respecting the principle of proportionality, creditors’ hierarchy and guaranteeing equal treatment across borders.

2. The Resolution Unit shall be empowered to fulfil the tasks set out in paragraph 1, in order to rehabilitate distressed institutions or to decide on a winding-up on non-viable institutions (critical to limit moral hazard). Among other actions it could require adjustments in capital or liquidity, adapt the business mix, improve processes, appoint or replace management, recommend guarantees, loans and liquidity assistance, total or partial sales, create a good bank / bad bank or a bridge bank, swap debt into equity (with appropriate haircuts) or take the institution into temporary public ownership.

3. The Resolution Unit shall comprise experts appointed by the Board of Supervisors of the Authority with knowledge and expertise in restructuring, turn-a-rounds and liquidation of financial institutions.

Article 12d

European System of Investor Guarantee Schemes

1. The Authority shall contribute to strengthening national Investor Compensation Schemes (ICS) by ensuring that they are adequately funded by contributions from financial institutions including from market participant headquartered in third-countries, and provide a high level of protection to all investors in a harmonised framework throughout the Union, which leaves the stabilising safeguard role of mutual guarantee schemes intact, provided they comply with Union standards.

2. Article 8 concerning the Authority's powers to adopt guidelines and recommendations shall apply to investors guarantee schemes.

3. The Commission may adopt regulatory and implementing technical standards as specified in the legislative acts referred to in Article 1(2) in accordance with the procedure laid down in Articles 7 to 7d of this Regulation.

Article 12e

European System of resolution and funding arrangements

1. A European Stability Fund for Securities and Markets shall be established in order to strengthen the internalisation of the costs of the financial system and to assist in crisis resolution for failing cross border financial market participants. Financial market participants operating in only one Member State shall have the option to join the fund. The European Stability Fund for Securities and Markets shall adopt appropriate measures to avoid that the availability of aid generates a moral hazard.

2. The European Stability Fund for Securities and Markets shall be financed through direct contributions from all cross border financial market participants identified under article 12b and those which have chosen to take part in that system pursuant to paragraph 1. Those contributions shall be proportionate to the level of risk that each of the financial market participants pose. Levels of contributions required shall take into account broader economic conditions e.g. the lending capacity to industry and SME and the need for financial market participants to maintain capital for other regulatory and business requirements.

3. The European Stability Fund shall be managed by a Board appointed by the Authority for a period of five years. The members of the Board shall be selected from staff proposed by the national authorities. The Fund shall also create a Consultative Board involving non-voting representation of the financial market participants participating in the Fund. The Board of the Fund may propose to the Authority the outsourcing of the management of its liquidity to reputable institutions (such as the EIB). These funds should be invested in safe and liquid instruments.

Article 13

Delegation of tasks and responsibilities

1. Competent authorities may, with consent of the delegatee , delegate tasks and responsibilities to the Authority or other competent authorities subject to the conditions set out in this Article. Member States may set out specific arrangements regarding the delegation of responsibilities that have to be complied with before their competent authorities enter into such agreements and may limit the scope of delegation to what is necessary for effective supervision of cross-border financial market participants or groups .

2. The Authority shall stimulate and facilitate the delegation of tasks and responsibilities between competent authorities by identifying those tasks and responsibilities that can be delegated or jointly exercised and by promoting best practices.

2a. The delegation of responsibilities shall result in the reallocation of competencies laid down in the legislative acts referred to in Article 1(2). The law of the delegatee authority shall govern the procedure, enforcement and administrative and judicial review relating to the delegated responsibilities.

3. Competent authorities shall inform the Authority of delegation agreements they intend to enter into. They shall put the agreements into effect at the earliest one month after informing the Authority.

The Authority may give an opinion on the intended agreement within one month of being informed.

The Authority shall publish any delegation agreement as concluded by the competent authorities by appropriate means, in order to ensure that all parties concerned are informed appropriately.

Article 14

Common supervisory culture

1. The Authority shall play an active role in building a common European supervisory culture and consistent supervisory practices, and ensuring uniform procedures and consistent approaches throughout the European Union and shall carry out, at a minimum, the following activities:

(a) provide opinions to competent authorities;

(b) promote an effective bilateral and multilateral exchange of information between competent authorities, with full respect of the applicable confidentiality and data protection provisions provided for in the relevant Community legislation;

(c) contribute to developing high quality and uniform supervisory standards, including reporting standards, and international accounting standards in accordance with Article 1(2a) ;

(d) review the application of the relevant regulatory and implementing technical standards adopted by the Commission, guidelines and recommendations issued by the Authority and propose amendments where appropriate;

(e) establish sectoral and cross-sectoral training programmes, facilitate personnel exchanges and encourage competent authorities to intensify the use of secondment schemes and other tools.

2. The Authority may, as appropriate, develop new practical instruments and convergence tools to promote common supervisory approaches and practices.

Article 15

Peer review of competent authorities

1. The Authority shall periodically organise and conduct peer review analyses of some or all of the activities of competent authorities, to further enhance consistency in supervisory outcomes. To this end, the Authority shall develop methods to allow for objective assessment and comparison between the authorities reviewed. When conducting peer reviews, existing information and evaluations already made with regard to the competent authority concerned shall be taken into account.

2. The peer review shall include an assessment of, but not be limited to:

(a) the adequacy of resources and governance arrangements, resourcing and staff expertise of the competent authority, with particular regard to the effective application of the regulatory technical and implementing technical standards referred to in Articles 7 to 7e and legislative acts referred to in Article 1(2) and to the capacity to respond to market developments;

(b) the degree of convergence reached in the application of Union law and in supervisory practice, including regulatory technical and implementing technical standards, guidelines and recommendations adopted under Articles 7 and 8, and the extent to which the supervisory practice achieves the objectives set out in Union law;

(c) good practices developed by some competent authorities which might be of benefit for other competent authorities to adopt;

(d) the effectiveness and the degree of convergence reached with regard to the enforcement of the provisions adopted in the implementation of Union law, including the administrative measures and sanctions imposed against persons responsible where these provisions have not been complied with .

3. On the basis of the peer review the Authority may issue guidelines and recommendations pursuant to Article 8 addressed to competent authorities ▐. The Authority shall take into account the outcome of the peer review when developing draft regulatory technical or implementing technical standards in accordance with Articles 7 to 7e. Competent authorities shall endeavour to follow the advice given by the Authority. Where a competent authority does not follow this advice, it shall inform the Authority of its reasons.

The Authority shall make the best practices that can be identified from those peer reviews publicly available. In addition, all other results of peer reviews may be disclosed publicly, subject to the agreement of the competent authority being the subject of the peer review.

Article 16

Coordination function

The Authority shall fulfil a general coordination role between competent authorities, including where adverse developments could potentially jeopardise the orderly functioning and integrity of financial markets or the stability of the financial system in the European Union .

The Authority shall promote a coordinated Union response, inter alia by:

(1) facilitating the exchange of information between the competent authorities;

(2) determining the scope and, where possible and appropriate, verifying the reliability of information that should be made available to all competent authorities concerned;

(3) without prejudice to Article 11, carry out non-binding mediation on the request of competent authorities or on its own initiative;

(4) notifying the ESRB of any potential emergency situations without delay;

(4a) taking all appropriate measures in case of developments which may jeopardise the functioning of the financial markets with a view to facilitating the coordination of actions undertaken by relevant competent authorities;

(4b) centrali