EN EN 
  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 23.9.2009 
SEC(2009) 1234 
  
COMMISSION STAFF WORKING DOCUMENT 
 
accompanying document to the 
Proposal for a  
 
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 
 
on Community macro prudential oversight of the financial system and establishing a 
European Systemic Risk Board 
 
Proposal for a  
 
COUNCIL DECISION 
 
entrusting the European Central Bank with specific tasks concerning the functioning of 
the European Systemic Risk Board 
 
Proposal for a  
 
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 
 
establishing a European Banking Authority 
 
Proposal for a  
 
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 
 
establishing a European Insurance a nd Occupational Pensions Authority 
 
Proposal for a  
 
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 
 
establishing a European Securities and Markets Authority 
 
IMPACT ASSESSMENT  
{COM(2009) 499 final} {COM(2009) 500 final} {COM(2009) 501 final} {COM(2009) 502 final} 
{COM(2009) 503 final} 
{SEC(2009) 1235}  
2  
Outline of the Impact Assessment report:  
 
1. Introduction  
2. Consultations and procedural issues 3. Problem definition  
4. Objectives 
5. Identification of policy options 
5.1. ESFS  
 
5.1.1 Powers and competences of  the Authorities in the ESFS 
 
5.1.2 Organisation and structure of the Authorities in the ESFS 
 
5.1.3. Financing of the Authorities in the ESFS 
 
5.2. ESRB  
 
5.2.1 Powers and comp etences of the ESRB 
 
5.2.2 Organisation and structure of the ESRB 
 
5.3. Financing of the ESRB: the Secretariat. 
 
6. Preliminary analysis of impa cts and comparis on of options 
6.1. ESFS  
 
6.1.1 Powers and competences of  the Authorities in the ESFS 
 
6.1.2 Organisation and structure of the Authorities in the ESFS 
 
6.1.3. Financing of the Authorities in the ESFS 
 
6.2. ESRB  
 
6.2.1 Powers and comp etences of the ESRB 
 
6.2.2 Organisation and structure of the ESRB 
3  
6.3. Financing of the ESRB: the Secretariat. 
 
7. Impact of the selected options 
8. Monitoring and evaluation 
ANNEXES 
 
 
ANNEX 1 -  Costing Tables for ESFS  
ANNEX 2 -  Impact of the ESFS  and ESRB on stakeholders. 
 
ANNEX 3 - Preliminary outline of sectoral legislation granting European Supervisory 
Authorities scope to exercise thei r powers in the field of binding 
technical standards 
 ANNEX 4 -  Summary of replies r eceived to public consultation 
 
ANNEX 5  - European Council Conclusions of 18/19 June 2009 
 
1  
1. Introduction 
 
The Commission Communication of 27 May 2009, "European financial supervision"1, 
proposed changes to the architecture of Europ ean financial supervision in order to remedy 
shortcomings in the area of financial superv ision revealed by the financial crisis of 2008-
2009. Specifically, it proposed the creation of two new bodies:  
• a European Systemic Risk Council (ESRC)  which should monitor and assess risks to the 
stability of the financial system as a whole ("macro-prudential supervision"), and should  
provide early warning of systemic risks th at may be building up and, where necessary, 
recommendations for action to deal with these risks;  
• a European System of Financial Supervisors (ESFS)  for the supervision of individual 
financial institutions ("micro-prudential supervision"), consisting of a network of national financial supervisors working in tandem w ith new European Supervisory Authorities 
(European Supervisory Authorities), crea ted by the transformation of the existing 
Committees for the banking, securities and in surance and occupational pensions sectors
2. 
The Communication proposed transferring to the new Authorities all of the current 
competences of these committees and granting them additional competences, including the 
following: 
• Developing proposals for draf t technical standards; 
• Resolving cases of disagreement between  national supervisory authorities, 
including within in colleges of supervisors; 
• Intervening in cases of manife st breach of Community law; 
• Exercising direct supervisory powers for defined entities; 
• Co-ordination and decision-ma king in crisis situations. 
 
The Communication of 27 May (henceforth "t he Communication") was accompanied by an 
Impact Assessment3, which was considered by the Imp act Assessment Board on 22 April. The 
Board provided its comments on 24 April, and a revised Impact Assessment was sent to the 
Board on 18 May.  The Communication of 27 May stated that the Commission intended to bring forward, as soon 
as possible, the legislative changes to put in  place the new framework for EU supervision, on 
the basis of the orientations set out in the Communication and after further consultation of 
stakeholders, so that the necessary measures  could be adopted in time for the renewed 
framework to be up and running before the e nd of 2010. It invited th e European Council to 
endorse this plan.  The Conclusions of the European Council of 18-19 June 2009
4 supported the creation of an 
ESRC (renamed European Systemic Risk Board, henceforth ESRB) and an ESFS, consisting 
                                                 
1 COM(2009) 252 final.   
2 Widely known as the "Lamfalussy level 3 committees": the Committee of European Banking Supervisors, the 
Committee of European Securities Regulators and the Committee of European Insurance and Occupational 
Pensions Supervisors. 
3 COM(2009) 715 final.  
4 Annex 5 to this Impact Assessment. 
2 of three new European Supervisory Authoriti es. Among other things, the European Council 
stated the following: 
• "The European Council supports the creation of a European Systemic Risk Board…" 
• "The European Council also recommends that a European System of Financial 
Supervisors, comprising three new European Supervisory Authoritie s, be established 
aimed at upgrading the quality and consistency of national supervis ion, strengthening 
oversight of cross border groups through th e setting up of supervisory colleges and 
establishing a European single rule book applicable to all financial institutions in the Single Market." 
• "the European Council stresses that deci sions taken by the European Supervisory 
Authorities should not impinge in any way on the fiscal responsib ilities of Member 
States. Subject to this and supplemental to the Council conclusions of 9 June 2009, the 
European Council agrees that the European Sy stem of Financial Supervisors should 
have binding and proportionate  decision-making powers in  respect of whether 
supervisors are meeting their requirements  under a single ru le book and relevant 
Community law and in the case of dis agreement between th e home and host state 
supervisors, including within  colleges of supervisors." 
• "European Supervisory Authorities should al so have supervisory powers for credit 
rating agencies." 
• The European Council welcomes the Commission' s intention to bring forward, by early 
autumn 2009 at the latest, the legislative pr oposals to put in place the new framework 
for EU supervision." 
• "The European Council invites the Commission to make concrete proposals for how the 
European System of Financial Supervisors could play a stro ng coordinating role among 
supervisors in crisis situations." 
The present Impact Assessment accompanies th e proposals for legislative acts creating the 
ESRB and the ESFS. For the ESRB two draft legi slative acts are proposed: (i) a Council and 
Parliament Regulation based on article 95 of th e Treaty, creating the ESRB, and (ii) a Council 
Decision based on Article 105.6 of the Treaty, governing the role of the European Central 
Bank in the ESRB. For the ESFS three legislativ e acts are proposed, all of them Council and 
Parliament Regulations under article 95 of the Treaty, one Regulation for each of the 
proposed new European Supervisory Authoriti es: a European Banking Authority (EBA), a 
European Securities and Markets Authority  (ESMA), and a European Insurance and 
Occupational Pensions Authority (EIOPA). 
It should be noted, regarding the European Supe rvisory Authorities in th e ESFS, that in order 
to determine the scope of certain of the powers conferred on them in the draft Regulations - in 
particular the power to propose draft technical  standards - amendments to the relevant 
community legislation in the banking, securiti es and insurance and occupational pensions 
fields will be introduced. It is intended that such amendments to sectoral legislation will be 
brought forward shortly in the form of an "omn ibus" directive with am endments to sectoral 
3 legislation5. Annex 3 outlines the specific matters in the relevant community legislation which 
have been identified for inclusion among the future amendments.    
This Impact Assessment builds on the analys is outlined in the Impact Assessment 
accompanying the Communication, and focuses in gr eater detail on those key decision points 
not already assessed previously. It therefore focuses on three particular aspects which were 
not covered in the first Impact Assessment but which must be determined before the legislative acts creating the ESRB and the ESFS can be presented, namely: 
1. The competences and powers of the ESRB and the Authorities in the ESFS; 
2. The organisation, structures  and procedures of the ES RB and the Authorities in 
the ESFS; 
3. Financing of ESRB and the Authorities in the ESFS. 
 
2. Consultations and procedural issues 
A public consultation and a public hearing took place prior to the adoption of the 
Communication, as noted in th e first Impact Assessment. 
A second public consultation, on the contents  of the Communication, was launched on 27 
May, the day of adoption of the Communication, with a deadline for comments of 15 July 
2009. Ninety-eight replies were received. A summ ary of the replies is available in annex 4. 
An Impact Assessment Steering Group was constituted in order to steer the preparation of this 
Impact Assessment, comprising representatives  from DGs: MARKT, ECFIN, SG, SJ,  ENTR, 
EMPL, COMP, ADMIN, BUDG and SANCO. The Steering Group met twice on 25 June and 
14 July 2009. The minutes of both  meetings were made available to the Impact Assessment 
Board. The Impact Assessment was submitted on 22 July 2009 and discussed by the Impact Assessment Board on 28 August 2009. 
The Board issued its opinion on 31 August 2009 a nd made a number of recommendations for 
the improvement of this report.  These have been taken into account in this final version of the 
impact assessment. The principal re commendations were the following: 
• Clarify that the independen ce of the ESAs, the ESFS the ESRB and members of their 
governing bodies is a specific objective of these proposals; 
• Explain the need for interaction between mi cro and macro supervision on the basis of 
stylised examples; 
• Clarify the notion of the si ngle rulebook" and explain th e mechanism for creating it; 
• Explicitly address how in substance the supervisory powers exercised by the ESAs 
could impact on Member States' fiscal responsib ilities, and illustrate this with practical 
examples; 
                                                
 
5 In addition, an amendment to the Re gulation on Credit Rating Agencies will be necessary in order to give the 
European Securities and Markets Authority full supervisory powers in that area. 
4 • Explain in greater detail at which stage a nd how the impacts (particularly on financial 
institutions) of the introduction of fu ture binding standards and information 
obligations will be assessed; 
• Clarify the arrangements for financing of the new agencies. 
 
3. Problem definition 
Regarding micro-prudential supervision, the problems identified in the first Impact 
Assessment can be summarised as follows:  
• Imbalance of interests of the home and ho st countries in the current supervisory 
model (resulting in a misalignment of incen tives in particular in cross-border crisis 
management), 
• Risks of competitive distortions in the In ternal Market and of regulatory arbitrage 
by financial institutions (arising in pa rt from differing supervisory rules and 
practices), 
• Insufficient co-operation and information exchange between national supervisors, 
• Excessive costs and administrative bur den to cross-border companies due to 
fragmented and inconsistent financial supervision. 
 
The problem tree for micro-prudential supervisi on is presented again here for convenience:  
 
Figure 1. Problem tree: micro-prudential supervision 
 
 
5 Problem drivers Problems General problems
Failures to challenge supervisory 
practices on a cross-border basisMismatch between the level of 
integration of EU financial markets and 
the organisation of supervision
Lack of consistent rules, powers and 
sanctions across Member StatesDiverging interests of the home and host 
countries in the current supervisory 
modelIncreased risks of cross border 
contagion for EU financial markets 
linked with the incresed integration, both 
throughout the EU and with global 
financial markets
Differences in supervisory practicesRisks of competitive distortions in the 
Internal Market and of regulatory 
arbitrage by financial companies Undermined confidence of consumers, 
employees, pensioners, small business 
and retail investors contributing to the 
economic recession
Fragmented responsibilities for 
supervision of the same financial groupLack of cooperation and information 
exchange among EU national 
supervisorsReduced global competitiveness of the 
European financial industry
Fragmented system of supervisory 
mandates leading to EU considerations 
not being taken into accountExcessive costs and administrative 
burden to cross-border companies due 
to fragmented and inconsistent financial 
supervisionRisks of uncoordinated policies driven 
by national interests with negative 
impact on the Single Market
Absence of legal arrangements 
allowing for EU-wide supervision of 
specific institutions, e.g. credit rating 
agencies 
Source: European Commission. Impact Assessment for the Communication 'European financial supervision' of 
27 May 2009 
 
The preferred solution for addr essing these problems was to cr eate a European System of 
Financial Supervision, comprising three Europ ean Supervisory Author ities, building on the 
existing Level 3 committees but with extended powers. This is not creating bodies from 
scratch, as is the case  for the ESRB, but it is neverthe less an important evolution. In 
implementing this preferred option, a number of  specific problems need to be addressed. The 
new bodies must be in a posi tion to ensure greater cohere nce of supervision across EU 
Member States, via all of their interventi ons, both legally-binding and non-legally binding 
ones. They must also have a structure which ensures that the powers will be used in an 
appropriate manner. The budgetary needs of th e new Authorities will be greater than the 
Level 3 committees, if only because the additi onal powers will require more staff. Specific 
issues to be tackled include the following:   
• Technical standards:
 despite the efforts and progre ss achieved by the current level 3 
committees, the prudential legislative framewor k has not yet attained the desired level 
of harmonisation and consistent application of rule s in the EU. Ensuri ng a single set of 
harmonised rules is an ambitious objective which requires establishing new mechanisms that may help accelerate this  process. Indeed, the current financial 
supervisory framework has been a good st arting point but ther e is now a firm 
determination to move forward and reach a higher degree of consistency than the one 
achieved so far. To contribute to this, the Au thorities will, in areas to be specified in 
the relevant sectoral legislation, develop draft technical standards. These standards 
constitute an effective instrument to streng then Level 3 of the Lamfalussy structure, 
which is currently limited to the adoption of non-binding guidelines; 
 
6 • Colleges of supervisors:  one issue is to ensure the ad equate functioning of colleges, 
particularly in terms of balancing the fl ow of information between home and host 
authorities. Another issue is to strengthen cooperation and facilitate joint decision-
making between members of colleges. 
• Emergency situations: there is a clear need for increased coordina tion between 
national supervisory authorities, in particul ar in case of adverse developments which 
potentially jeopardise the orderly functioning and integrity of the financial system in 
the EU. However, in some emergency situa tions, coordination may not be sufficient, 
notably when national supervisors alone l ack the tools to respond rapidly to an 
emerging cross-border crisis. The new Au thorities should therefore, in such 
exceptional circumstances, have the power to  require national supervisors to jointly 
take specific action. 
• Impingement of Member States' fiscal responsibility:   the Member States have decided 
that decisions taken by the ESAs cannot impinge on their fiscal responsibilities6. This 
decision ensures that the principle of subsidiarity is respected, because the area of direct taxation is an  exclusive competence  of the Member States, and EU bodies 
cannot exercise any competences in that area. This limitation on the ESAs’ activity 
potentially concerns decisions  settling disagreements between national supervisors and 
decisions taken in emergency situations. Th e problem is to implement this limitation 
on the ESAs' powers in an effective way, wh ile not hindering the activity of the ESAs 
in areas which do not impinge on the fiscal  responsibilities of Member States.  
 
Regarding macro-prudential supervision, the problems identified in the first Impact Assessment can be summarised as follows:  
• Lack of appropriate analysis of macro-prude ntial risks at EU level, including risks 
stemming from macro-economic imbalan ces. Currently, there is no EU body 
entrusted with this role; 
• Lack of interaction between micro- and macro-prudential analysis. The soundness of 
individual firms was often supervised in  isolation and there was little or no 
awareness of the degree of “interde pendence” or “interconnectedness”; 
• Lack of adequate corrective action, coop eration and co-ordination by competent 
authorities during the building up and in  the course of financial crisis. 
 
 The problem tree macro-prudential supervision is presented again here for convenience: 
 
 
Figure 2. Problem tree: macro -prudential supervision 
                                                
 
6 European Council Conclusions quoted in the Introduction. 
7 Problem drivers Problems General problems
EU supervisory arrangements place too 
much emphasis on the supervision of 
individual firms, and too little on the 
macro-prudential sideMismatch between the level of 
integration of EU financial markets and 
the organisation of supervision
Fragmented approach to macro-
prudential supervision poses 
challenges to information exchange 
between the relevant authoritiesLack of appropriate analysis of macro-
prudential risks at EU level, including risks 
stemming from macro-economic imbalancesIncreased risks of cross border 
contagion for EU financial markets 
linked with the incresed integration, both 
throughout the EU and with global 
financial markets
Ineffective early warning mechanisms 
in the EULack of interaction between micro- and macro-
prudential analysis - the soundness of individual 
firms' was often supervised in isolation and 
there was little or no awareness of the degree 
of “interdependence” or “interconnectedness” Undermined confidence of consumers, 
employees, pensioners, small business 
and retail investors contributing to the 
economic recession
Lack of the appropriate process in the 
EU insitutional framework for ensuring 
follow-up to any warnings on macro-
prudential risksLack of adequate corrective action and 
coordination by competent authorities during 
the building up and in the course of financial 
crisisReduced global competitiveness of the 
European financial industry
Insufficient cooperation at international 
level on macro-prudential supervisionRisks of uncoordinated policies driven 
by national interests with negative 
impact on the Sin gle Market  
Source: European Commission. Impact Assessment for the Communication 'European financial supervision' of 
27 May 2009 
 
In determining a solution for addressing these problems, the first Impact Assessment took as 
its baseline scenario the EU retaining its frag mented approach to macro-prudential oversight, 
without introducing a mechanism for formally issuing and ensuring follow-up to warnings 
and recommendations. It analysed a range of  possible options for developing a macro-
prudential body, including building on existing structures  using either th e Economic and 
Financial Committee (EFC) or the European Syst em of Central Banks (ESCB) or using the  
new microprudential structure (ESFS)  by giving the leading ro le in macro-prudential 
supervision to the new Authorit ies with the support of the netw ork of national supervisors.  
The analysis concluded that, on balance, a new body  (the ESRB) should attain high level of 
effectiveness and provide for an adequate leve l of legitimacy. The envisaged architecture, 
status and operating procedures should allow th is body to meet the objectives of efficiency, 
effectiveness and value for money in the most a ppropriate way.  Having sole responsibility for 
macro-prudential risk warnings and an appropr iate composition (bringing together the ECB, 
the national central banks, the new Supervisor y Authorities as well as national supervisory 
authorities) would create valuab le synergies, ensure an appr opriate level of representation, 
and have a mutually reinforcing impact on the stability of the financial system.  In implementing this preferred option, a number of specific pr oblems need to be addressed 
with regard to the ESRB. A new body is bein g created, with no precedents. The challenge is 
to create the body in such a way that its powers are appropriate for the tasks which it must 
carry out, namely that of analysing macro-eco nomic risk and warning of potential systemic 
risks. Specific elements to be dealt with  or taken into account include the following: 
 
• The ESRB cannot be given binding powers unless it has legal personality, but despite 
this it must be as effective as po ssible in preventing financial crises.  
8 • The warnings and recommendations of the ES RB must reach the right addressees and 
lead to the desired action, but without havi ng the counter-productive effect of helping 
to trigger a crisis by bein g self-fulfilling through the reaction which they provoke.  
• The issue of information needs is also a key one, as the ESRB will only be effective if 
it receives the information which it need s in order to carry out macro-prudential 
assessments effectively. 
• The ESRB must have a secretaria t so structured and located as  to allow it to carry out 
its functions effectively a nd with a minimum cost.  
• Subsidiarity must be respected in the structuring and activity of the ESRB, in matters 
such as the representation of Member Stat es and other parties on the Board, decision-
making procedures, and follow-up to  warnings and recommendations. 
 
4. Objectives 
 
4.1. General objectives  
This impact assessment takes as its starting poi nt the conclusions reached in the first impact 
assessment and considers the options for best delivering the policy choices made in that 
assessment.  Therefore, the sp ecific objectives defined in th e first impact assessment now 
constitute the general objectives of the current initiative, to facilitate this more detailed 
analysis.   For micro-prudential supervisi on, the specific objectives out lined in the first impact 
assessment can be summarised as:  
1. Improve the coordination of cross border supervision. This includes ensuring that the 
interests of all superv isors are well represen ted and taken into account by others, that  
cross-border supervisory colleges operate effectively, and that decisions are taken 
consistently across borders.  
2. Raise the quality of financia l regulation across the EU by bringing about a level 
playing field for financial in stitutions operating in various Member States, including a 
consistent application of rules and the development of a single rulebook
7 and ensuring 
supervision and regulation is  exercised independently.  
3. Improve crisis prevention, coordination and management across the EU as a whole , 
and in particular in areas where a decision in  one Member State can have an impact of 
other Member States.  
4. Improve effectiveness and efficiency of supervision for supervised institutions. 
 
The mandate of the ESFS will be to act with a view to: (i) improve the functioning of the 
internal market, including in particular a high, effective and consistent level of regulation and 
                                                 
7 A "single rulebook" is a long term policy objective.  The expression "single rulebook" is used here and 
elsewhere to reflect two important goals - that  community legislation be applied more consistently, and that as far as possible differences in national transposition of  Community law stemming from exceptions, derogations, 
additions or ambiguities be identified and removed, so th at one harmonised core set of standards can be defined 
and applied.  Such a single rulebook will be a combination of European legislation adopted at level 1 and level 2, and technical standards based on proposals from the Author ities in areas clearly defined in sectoral legislation, 
including matters which are presently covered by non-binding level 3 guidelines. 
9 supervision, (ii) prot ect depositors, investors,  and policyholders and ot her beneficiaries (iii) 
ensure the integrity, efficiency and orderly functioning of financia l markets, (iv) safeguard the 
stability of the financial system, and (v) st rengthen international supervisory coordination. 
  For macro-prudential oversi ght, the objectives were: 
 
1. Develop a European macro-prudential risk assessment to deal with the lack of 
appropriate analysis of macro- prudential risks at EU level, including risks stemming from 
macro-economic imbalances;  
2. Enhance the effectiveness of early warning mechanisms by improving the interaction 
between micro- and macro-prudential analysis  and ensuring the independence of the body 
issuing early warnings. The soundness of i ndividual firms was often supervised in 
isolation and there was little or no awareness of the degree of “interdependence” or “interconnectedness”;  
3. Allow for risk assessments to be translated  into action by th e relevant authorities to 
respond to the current lack of adequate corr ective action, cooperation and co-ordination by 
competent authorities before a financial crisis occurs. 
 
The mandate of the ESRB shall be to be respon sible for the macro-prude ntial oversight of the 
financial system within the European Union in order to prevent or mitigate systemic risks within the financial system, so as to avoi d episodes of widespread financial distress, 
contribute to a smooth fu nctioning of the internal market a nd ensure a sustainable contribution 
of the financial sector to economic growth.  
 
 
System-wide objectives 
 
In addition to the analysis in th e previous impact assessment, it is important to ensure that the 
system as a whole functions effectively, that is, that the financial system is able to withstand 
shocks and the unravelling of financial imbalan ces or potential risks are spotted early by the 
relevant authorities and necessary action is ta ken.  The latter can fl ow both ways, with the 
risks being identified at the macro level and action taken at the supervisory and regulatory 
level involving individual institut ions, or alternatively in the opposite direction with risks in 
an individual institution identified at the supervisory level and action taken to prevent 
contagion at the macro level. This is an objecti ve that will need to be considered in the 
selection of a number of options.  An example of the system-wide linkages could be that of remuneration.  Given the widely 
held view that, to an extent, some remunerati on policies may have led to  excessive risk-taking 
in certain institutions which on aggregate may ha ve contributed to putting the wider system at 
risk, this is a clear area where the need for acti on could fall to either or both elements of the 
system.  At the macro level, if some remunera tion policies are putting the entire system at 
risk, the ESRB may wish to ma ke a warning or a recommendati on to supervisors to adjust 
their remuneration policies to reflect this.  Alte rnatively they may request the Authorities to 
develop guidelines or draft technical standards to ensure a more consistent application of 
community law if there is a divergence of practices.  
10 Alternatively, the European Supervisory Auth orities via national supervisors may identify 
risky remuneration policies in indi vidual institutions and take action either to issue guidelines, 
or to channel the information on to the ESRB for analysis.  In extreme cases, if such policies 
are the result of non-application of legal requirements, the Aut hority may be able to take 
action to require national supervisors to  apply the requirements effectively. 
 As a specific objective, this means that it is im portant to achieve the appropriate degree of 
coordination between the macro and micro elemen ts of the system.  In particular it means 
that:  
• the mandates and objectives of each are suffi ciently clear and precise, so as not to 
create uncertainty over who is responsible for what; 
 
• information sharing obligations are suffici ent to ensure that the ESFS and the ESRB 
are able to discharg e their responsibilitie s effectively, but not unduly burdensome on 
either market participants or the authorities themselves; 
 
• there is appropriate cross representation be tween the ESFS and ESRB, but that neither 
institution dominates the other. 
 The mandates of the ESRB and ESFS (above) show that while each part of the system's 
objectives are clear and distinct , there is a limited (and necessa ry) degree of overlap between 
the two.  Issues related to information shar ing and cross-representa tion are discussed in 
sections 6.1.1, 6.1.2, 6.2.1 and 6.2.2.  
 
4.2. Specific and oper ational objectives: 
 
Building on these general objecti ves, there are also more specific objectives for the purposes 
of this Impact Assessment, related specifically to the possible options to be considered in the creation of new bodies. The power s, structure, organisation, co sts and revenues of the new 
bodies, the ESRB and the European Supervisor y Authorities, must be appropriate for 
achieving the objectives determined above.    These specific objectives  can be defined as:  
 
Specific objectives with regard to the ESFS: 
a. Assume all of the tasks of the curre nt EU Committees of Supervisors: 
including the issuance of non-binding guide lines and the ability to give advice 
on certain issues; 
b. Ensure a  set of common rules to comp lement non-binding guidelines at level 3 
of the Lamfalussy structure, ensuri ng a level playing field for financial 
institutions and minimising the risk for regulatory arbitrage; 
c. Ensure a consistent application of EU rules:  together with a set of common 
rules, the development of a single ru le book which will increase certainty, 
predictability and a greate r likelihood of supervisory best practice spreading; 
d. Determine how to ensure a common s upervisory culture, including ensuring 
colleges of supervisors develop successfully and consistently; 
11 e. Determine whether/how to grant full supervisory powers for certain 
institutions: including ensu ring that a coherent ba lance is struck between 
national and pan-EU supervision; 
f. Determine how to co-ordinate and effec tively manage crisis situations, to 
ensure that decisions in one Member Stat e do not have negative effects in other 
Member States; 
g. Ensure access to necessary information to facilitate the achievement of the 
objectives outlined above; 
h. Member States have a core responsibility  in preserving fina ncial stability in 
crisis management, in particular with  regard to stabilising and resolving 
individual ailing financia l institutions. A mechanism should be established to 
ensure that measures by the Author ity do not impinge on the fiscal 
responsibilities of Member States, while  not unduly hindering the effectiveness 
of the new Authorities.; 
i. Ensure the independence of the members of the Boards of the ESAs in the 
fulfilment of their tasks as well as the independence of the institution as a 
whole. 
 
Specific objectives with regard to the ESRB 
a. Establish adequate procedures to ob tain information about macro-economic 
risks for financial stability; 
b. Identify macro-prudential risks in Eur ope (and analyse the interconnection 
with individual financia l institutions' soundness); 
c. Issue warnings to the re levant actors and recomme nd the appropriate actions; 
d. Determine how to achieve effective follow-up to warnings/recommendations; 
e. Ensure the independence of the members of the ESRB in the fulfilment of their 
tasks as well as the independen ce of the institution as a whole. 
 In order to achieve these specific objectives, a number of decisions need to be taken with 
regard to the particul ar powers, organisation and financi ng of the ESFS and the ESRB. Thus, 
the operational objectives can be defined as  granting the ESFS and the ESRB the correct 
powers, organisation and financing so as to achieve the specific obj ectives detailed above. 
 
5. Identification of policy options  
 
5.1. ESFS  
 
5.1.1 Powers and competences of  the Authorities in the ESFS 
 Regarding the precise powers and competences to  be granted to the European Supervisory 
Authorities (ESAs) in the ESFS, the following discussion considers th e categories of powers 
and competences covered in the Communication, and the horizontal issu e of safeguards to 
prevent the Authorities taking actions whic h impinge upon the fiscal  responsib ilities of 
12 Member States. It takes for granted that all of  the current powers of the Level 3 Committees 
will be transferred to the new Authorities, as this issue was covered in the previous Impact 
Assessment. It does not consider the option of granting to the European Supervisory 
Authorities competences falling below those of the Level 3 committees, as this would be out 
of line with the conclusions of the previous Impact Assessment and the Communication.  
 The discussion of powers and competences th erefore focuses on the question of which 
additional powers and competen ces should be granted to the European Supervisory 
Authorities, on top of those currently held by the Level 3 committees. In each case, the 
baseline is considered to be  the powers/competences, which the Level 3 committees currently 
have.  It should also be emphasised again here that, w ith regard to binding tech nical standards, draft 
sectoral legislation will be in troduced in order to specify prec isely in which areas the powers 
granted to the European Supervisory Author ities can be applied. The granting of full 
supervisory powers for any particular category of institution will al so involve sectoral 
legislation. With regard to the powers of the Aut horities in the field of dispute settlement, this 
can only be exercised in areas in which co- operation, coordination or joint decision-making 
between supervisors is required by  sectoral legislation, and so me modifications to sectoral 
legislation will be necessary in order to clarify when this is the case.  
 The European Supervisory Authorities will always  have the right to ad dress an opinion to the 
Commission on such prudential matters, either at  the request of the Commission or at their 
own initiative. They should be able to a dopt such opinions on pr udential assessments by 
Member States on mergers and acquisitions in  the financial sector, covered by Directive 
2007/44/EC (with or without a Community di mension) and to publish such opinions. 
 
5.1.1.1. Powers to ensure a single set of harmonised rules 
 
 
The options for consideration here are the following:  
 1.  The power for the Authorities to adopt guidelines and recommendations only, together 
with level 2 implementing rules adopted by the Commission under current procedure 
(baseline scenario). Under th is option, in order to promote convergence of prudential 
rules the European Supervisory Authorit ies would have the capacity to issue 
guidelines and recommendations addressed to national authorities. Non-binding 
guidelines and recommendations may be addres sed to national supervisors and market 
operators in order to provid e guidance on the application of  EU regulatory provisions. 
There would thus be no changes to the "Lam falussy system" of legislation, with level 
2 measures adopted by the Commission w ith comitology and non-binding level 3 
measures. 
 2.  Option 1, plus the power to make proposal s to the Commission fo r binding technical 
standards, in areas to be specified in sect oral legislation. In order to achieve the 
objective previously mentioned, the Authorities  would also, in areas specified in the 
relevant sectoral legislati on, develop draft technical sta ndards. These draft standards 
would be submitted to the Commission for endorsement (accompanied as appropriate by a proportionate analysis of the potential re lated costs and benefits) in the form of 
regulations or decisions so as to  give them direct legal effect. 
13 3. A theoretical third option, for the Authori ties to themselves adopt binding technical 
standards, must be ruled out at the outset as it would conflict with the Treaty based 
responsibilities of the Comm ission and give the Authoriti es discretionary powers, 
requiring a revision of the Treaty. 
 
 
5.1.1.2. Powers to bring about c onsistent application of EU rules  
 
 The options for consideration here are the following:   1.  No powers (baseline). Under this option, in  line with the current competencies of 
Level 3 Committees, the Europ ean Supervisory Authoritie s would have no powers to 
contribute to the consistent ap plication of EU rules, that  is, they have no powers to 
ensure consistent application of Community  rules nor any powers to settle disputes 
between home and host authorities.  
 2.  Option 1, mediation role only in case of  disagreement between national supervisors. 
According to this mediation role, the Eu ropean Supervisory Authorities should 
encourage and facilitate the dialogue between national supe rvisors in order to find a 
common point of understanding.  
 3.  Option 2, binding dispute settlement powers, in case of disagreement between national 
supervisors. In the event of inability to r each an agreement the European Supervisory 
Authority would adopt a decisi on that would settle the disp ute. This decision would be 
binding for the parties concerned. 
 4.  Option 3, plus a power to intervene to warn national supervisors of breaches of 
Community law. Besides the capacity to settle disputes through legally binding 
decisions, the European Supervisory Author ity could investigate situations where 
national supervisors may have diverged significantly from Community legislation. 
Whenever a breach of Community law is observed, the European Supervisory Authorities would then issue a recommendati on for action addressed to the relevant 
national authority. The Commission could subs equently intervene to make such a 
recommendation binding. 
 5.  Option 4, plus the possibility for the Eu ropean Supervisory Authorities to adopt a 
binding decision addressed to a market opera tor (in respect to Community law which 
is directly applicable to them, i.e. Regulat ions), in cases where a Commission decision 
rendering an ESA recommendation binding has not been followed by a national 
supervisor 
  
 
5.1.1.3. Ensure a common supervisory  culture and consistent supervisory 
practices  
 
The options for consideration here are the following:    
14 1. Same powers as the Level 3 committees (baseline). The European Supervisory 
Authorities would continue to build a co mmon supervisory culture with the same 
powers held at present by the Level 3 co mmittees. Thus, the European Supervisory 
Authorities would carry out tasks such as:  
• Issuing guidelines and technical interp retations to promote the convergence 
of supervisory practices; 
• Fostering training programmes and exchange of personnel; 
• Conducting peer analysis, and 
• Providing advice to supervisors. 
•  
 
2.  Option 1, plus power to participate in  colleges of supervisors. The European 
Supervisory Authorities would be granted the possibility to particip ate in colleges of 
supervisors. By participating in the main colleges of supervisors, the Authorities 
would contribute to promoting the efficient and consistent functioning of colleges and 
monitoring the coherence of  the implementation of Community legislation across 
colleges. 
 3.  Option 2, with a requirement to participate in all colleges of supervisors. The 
European Supervisory Authority would be present in all colleges of supervisors to ensure the consistency and convergence of all decisions adopted by these colleges. 
 
 
5.1.1.4. Full supervisory powers
 
 
The options for consideration here are the following:  
 1.  No possibility of powers (b aseline). At present, day-to-d ay supervision of financial 
entities is in all circumstances carried out  by national supervis ory authorities. The 
baseline implies no supervisory powers for any European body. 
 2.  Option 1, the possibility of exclusive supervisory powers for entities with a 
Community-wide reach, to be gran ted by sectoral legislation. 
 3.  Option 2, the possibili ty of supervisory powers for certa in entities shared with national 
supervisors. The supervision of these entiti es would be carried out both by national 
supervisors and European Supervisory Authorities.  
  It should be noted that the Regulations esta blishing the European Supervisory Authorities 
would not grant them any supervisory powers,  but would only open the possibility for 
subsequent legislation to grant them such power s. This is only envisage d in cases where there 
is directly-applicable EU legislation regulat ing the entities in ques tion (Regulations, not 
Directives transposed by national legislation). That is why the discussi on in this document 
does not concern the pros and cons of granting full supervisory powers to the Authorities for 
any particular category of institution (although it should be noted that the only category of 
financial institution currently regulated – or sh ortly to be regulated – by EU Regulation is 
Credit Rating Agencies). 
 
15 5.1.1.5. Powers in emergency situations:  
 
As a preliminary remark, an issue arises with re gard to the definition of emergency situations. 
It is impossible to define exhaustively in legi slation when a cross-border emergency situation 
does and does not exist. Havi ng noted this, the options fo r consideration here are the 
following:    1.  No powers (baseline). Following the baseline scenario, the European Supervisory 
Authorities would not be invo lved in either coordinating the actions of national 
supervisory authorities nor take any decisions to that effect. 
 2.  Option 1, coordination powers only. Under this option, the European Supervisory 
Authorities would have a co ordinating role in emergenc y situations by facilitating 
cooperation and exchange of information between the competen t authorities.  
 3.  Option 2, coordination power plus the power to take bind ing decisions (addressed to 
financial institutions and/or to national supervisors). Serious threats to the orderly functioning and integrity of financial markets or  the stability of the financial system in 
the Community require a swift and concer ted response at Community level. The 
Authority could therefore be able to require  national supervisory authorities to take 
specific actions to remedy an emergency situation. As the determination of the existence of an emergency situation involve s a significant degree of appreciation, this 
power could be conferred on the Commission. Such powers would be  subject to the 
safeguard provisions discussed below, en suring that decisions by the Authorities 
would not impinge on the fiscal res ponsibilities of the Member States. 
 
 
5.1.1.6. Powers to collect and manage micro-prudential information 
 
 
This power should be analysed separately as re gards information for colleges of supervisors, 
and information for carrying out th e other tasks of the Authorities. With regard to colleges of 
supervisors, there are three options:   1. No information for colleges of s upervisors (this is the baseline); 
  2. Option 1: receive information relating to individual financial institutions, as a member of 
all colleges of supervisors, but no role in management or distribution of information; 
 3. Option 2: receive information relating to indivi dual financial institutions, as a member  of 
colleges of supervisors, and in addition play  a role in management or distribution of 
information, in order to ensure that all releva nt information is received by all members of 
the college.,  
 With regard to information relating to the other tasks of the Authorities, there are again three 
options:   1. The same information which the Level 3 Committees receive, namely aggregated 
anonymised information only (this is the baseline); 
  
16 2. Option 1: only information on individual financ ial entities which are directly supervised 
by a European Supervisory Authority;  
 3. Option 2: option 1, plus the possibility of  ad hoc information requests to national 
supervisors or other relevant national authorities in connection with any matter related to 
the execution of the tasks of the Authorities.  
 For each category of information, the decision on whether the European Supervisory Authorities should have access to it must be taken in the light of the conclusions on the 
competences of the European Supervisory Au thorities. Once the appropriate tasks and 
competences of the European Supervisory Author ities have been decide d, it can be considered 
what information is necessary for the European  Supervisory Authorities to fulfil that role 
adequately.   For each category of information, if it is consider ed that the European Supervisory Authorities 
should have access to that category of informat ion, it should further be considered if they 
should be able to approach financ ial institutions direc tly in order to obtain it, or whether they 
should be obliged to obtain it via th e national supervisory authorities. 
 
 
5.1.1.7. Safeguard for fiscal res ponsibilities of Member States
 
 
The Communication (section 4.2, part  8) states the following: " Without prejudice to the 
application of Community law, and recognising th e potential liabilities t hat may be involved 
for Member States, decisions under the above mechanisms shall not directly impinge on the 
fiscal responsibilities of the Member States. " This was echoed in the conclusions of the 
European Council of 18-19 June 2009, which stated: "  decisions taken by the European 
Supervisory Authorities should not impinge in  any way on the fiscal responsibilities of 
Member States." The options to be considered are the following:  
 1. No formal legal reference in the Regulat ions establishing the European Supervisory 
Authorities to safeguards for Member States ' fiscal responsibilities, other than a 
recital, leaving no legal obligation on the Eu ropean Supervisory Authorities to respect 
this principle other than the Treaty, which re serves direct taxation as a competence of 
the Member States;  
 2. Option 1, a general reference in the f ounding act of the European Supervisory 
Authorities, which does not stipulate wh ich acts may impinge on Member States' 
fiscal responsibilities, combin ed with the standard right of Member States to appeal 
acts of the Authorities to the Appeal  Board and the Court of Justice;  
 3. Option 2, the application of a formal safe guard procedure, requi ring a Member State 
which considers its fiscal res ponsibilities to have been infringed to bring the matter to 
the attention of the Council, which could take a decision on th e basis of a qualified 
majority 
 
 
17 5.1.2. Organisation and structure of the Auth orities in the ESFS 
 
 
5.1.2.1. Joint Committee of Eu ropean Supervisory Authorities  
There is a need for the three new Authorities to coordinate their po licies and ensure cross-
sectoral cooperation so as to reflect th e relevant market trends and realities.  
 The options to be considered are the following:   
1. No Joint Committee for the ESFS at a ll (in which case the Joint Committee on 
Financial Conglomerates would need to rema in in existence). This is the baseline. 
 2. Option 1: create a Joint Committee with  no legal personality, ensuring mutual 
understanding, cooperation and consistent s upervisory approaches between the three 
new Authorities. A Subcommittee to the Jo int Committee could be established to 
specifically address cross-sectoral issu es, including financial conglomerates, and 
ensuring a level playing field. While the actu al decisions on, for example the Financial 
Conglomerates Directive, would be taken by the individual ESAs, the Joint Committee 
should ensure that common decisions are ta ken by the Authorities in parallel. Option 
2: to, create a Joint Committee with lega l personality as a Community body, with 
specific tasks and competences, notably w ith respect to cross-sectoral issues. 
  
5.1.2.2. Voting procedure
 
 
The options to be considered are the following:  
1. Qualified majority voting (to be considered as the baseline based on the practice in the 
Level 3 committees);  
2. One member one vote, or  
3. A hybrid system, involving for example QM V for certain issues, otherwise one 
member one vote. 
  
5.1.2.3. Involvement and role  of relevant stakeholders 
 
 
The Communication states " The European Supervisory Author ities should liaise in a 
structured way with all relevant stakeholders, including consumers ."  This structured liaison 
could involve consultation with the stakeh older group or groups, who would in turn 
communicate the opinions of existing or new Commission financial services groups 
representing a broader stakeholder community.   The options are: 
1. No formal standing stakeholder group, but the possibility for the European 
Supervisory Authorities to make public consultations (this is the baseline); 
2. One permanent stakeholder group for all European Supervisory Authorities;  
3. Specialised separate stakeholder groups for each European Supervisory Authority;  
4. Ad hoc consultative groups on different topics. 
  
18 5.1.3. Financing of the Authorities in the ESFS 
 The current Level 3 Committees of Supervisors are financed by contri butions from national 
supervisory authorities, complemented by action grants for specific task s (e.g. training) from 
the Community budget. However, since the new Aut horities are to be classified as Regulatory 
Agencies for the purposes of Article 185 Financial Regulation, it will not be possible for them 
to receive funding from such grants. The baseline  option in this impact assessment is therefore 
considered to be 100% Member State funding vi a national supervisors, as for the level 3 
committees, without Community grants.  Due to the new Authorities' status as EU bodies, the Member St ate funding could be 
complemented by a subsidy from the EU budget.  The Community contribution would be set 
at a level to balance expenditu re and revenue and ensure con tinuity of the Authorities'  
respective missions. Any combination of propor tions of funding by the Community and the 
Member States is possible.   Although it is also theoretically possible that the new Authorities could be 100% financed by 
the Community, the constraints of the Co mmunity budget under the current financial 
perspective (2007-2013) have to be duly taken into consideration.  In case of Community 
funding – be it partial or tota l – the Framework Financial Re gulation (Commission Regulation 
No 2343/2002) will be applied to the new Authorities.  
 
The following options for financing the Europe an Supervisory Authorities are therefore 
considered:  
1. Full funding of ESAs' costs by the Member  States (contributions from national 
supervisory authorities); 
 
2. Combined financing from the Community  budget and from the Member States; 
 
3. Full funding of ESA's costs from the Community budget. 
  
5.2. ESRB 
 
Building on the analysis in the previous impact assessment, the following assessment 
considers at a more granular level the vari ous options for designing and operationalising the 
ESRB in the most effective and efficient manne r and at the minimum cost to achieve the 
specific objectives, identifi ed in chapter 4 above.   
 
 
5.2.1 Powers and competences of the ESRB 
 
5.2.1.1. Follow up to wa rnings and recommendations
 
 
The options for consideration here are the following:  
 
1.  No follow up mechanism (baseline). Th e ESRB would be cons idered as a purely 
advisory body and there would be no required follow-up to its 
19 warnings/recommendations. Addressees woul d be free to follow the ESRB advice or 
not.  
2. Required follow–up. Under this option, th e ESRB warnings or  recommendations 
would be binding for the addressees which would be required to comply within a 
specific timeline. 
 3.   Comply or explain (within a specific timeline). The follow-up of the ESRB warnings 
or recommendations would be ensured by a "comply or explain" mechanism according 
to which the addressees would have to comply with the decision within a specific timeframe or will be require d to explain their decision not to comply. Under this 
option, addressees of recommendations w ould not be able to simply ignore a 
recommendation from the ESRB. They w ould be compelled to evaluate the 
recommendation and choose a line of action.  This could be to follow what is 
prescribed in the recommendation or to  choose a different approach, but the 
recommendation could not be ignored. If the addressee chooses not to follow the 
recommendation, it is required to  detail the reasons for this. 
 
5.2.1.2. Information access
 
 
The options for consideration here are the following:  
 
1.  No access (baseline). Under this opti on, the ESRB would only have access to 
information already in the public domain on financial institutions and the financial 
system.  
  2.  Access to aggregated da ta as necessary (for exam ple based on existing reporting 
procedures). The ESRB would collect ad-hoc or regular data on the financial system 
and institutions, on an aggregated basis, su ch that individual financial institutions 
cannot be identified. 
 3.  Access to aggregated data and relevant information on individual institutions upon 
request. In addition to the regular collec tion of the aggregated data, upon reasoned 
request, the ESRB would be granted access to individual data when the entity, because 
of its size, cross-border nature or the ri sks posed, may be considered as systemic. 
 
5.2.1.3. Degree of publicity of  warnings and recommendations
 
 
The options for consideration here are the following:  
 
1.  All warnings and recommendations remain confidential. They would be transmitted 
only to the addressees and other relevant parties (e.g. ESAs, Counc il). This would be 
the baseline. 
 2.  Full transparency. Warnings and recommendations would be automatically made 
public. 
 3.  Publication according to general principl es agreed in advance. General guiding 
principles would be defined to determine in advance, whether a decision should be 
made public or not (for example general risk warnings related to financial 
20 developments at EU level could be made public as a rule to raise awareness among 
market participants while more targeted  warnings/recommendations could be kept 
confidential in order to  avoid counter-productive  reactions of panic). 
 4. Publication to be decided on a case-by-case basis. The de cision to publish or not a 
warning or a recommendation would be left to the ESRB as part of its discretionary 
power. This could be part of th e follow-up mechanism. Warnings and 
recommendations would be confidential by default but the ESRB could decide to 
make a warning or recommendation public if it  deems the follow-up to insufficient, or 
for any other reason. The publicity  of the decision could in this case be used as an 
additional incentive to act.  
5.2.2 Organisation and st ructure of the ESRB  
 
5.2.2.1. Size of board and scope of expertise
 
 
The options listed below are not mutually exclusive.  The analysis will assess the appropriate balance between each of the groups identified below: 
 
1. Baseline (current situation of fragme nted macro-prudential supervision) 
2. Central banks  
3. Micro-prudential supervisors 
4. Other bodies (such as the Commission, EFC chair, EEA country representatives) 
5. Independent persons, including experts, academics etc. 
  
5.2.2.2. Addressees of warnings
 
 
The options for consideration here are the following:  
 
1.  No specific addressees (baseline).  2. Member States only. Under this option, the addressees of ESRB warnings or 
recommendations would be the Member Stat es (including supervisors). Warnings or 
recommendations could be addressed to one individual Member Stat e or to a group of 
Member States, pointing out a particular risk  and asking the Member State(s) to take 
corrective action –in the case of recommendation. 
 3.  Supranational Authorities: ESAs and the Co mmission only. It coul d be envisaged that 
the ESA receive warnings or recommendati ons from the ESRB for measures falling 
under their field of competences or th e Commission when legislative action is 
necessary. 
 4.  Competent national authorit ies + individual inst itutions. Under this option, the ESRB 
would be entitled to issue warnings or reco mmendations to individual institutions or 
categories of institutions i.e. credit institutions, insurance companies, investment firms.   
 5. A combination of all the previously me ntioned addressees. Under this option, the 
ESRB would be able to issu e warnings and recommendations to any of the following 
21 addressees: the ESAs, the Commission, Memb er States or more specifically, to 
competent national authorities. 
  
5.2.2.3. Stakeholder involvem ent and other advisory bodies 
 
 
The options below refer to the modalities of involvement and not the frequency of 
consultation. Due to the nature and objectives of the tasks fulfilled by the ESRB it is neither 
feasible nor appropriate to undertake a c onsultation on all warn ings/recommendations. 
Therefore the description and subsequent analysis  of the options below assume that it will be 
up to the ESRB to decide about the criteria co ncerning the frequency of the consultation of 
stakeholders (i.e. according to the subject discussed, the urgency of the ESRB initiative etc.). The same applies a fortiori to the consultation of other advisory bodies deemed to provide a 
support to the ESRB 'on demand'.  
1. None (baseline) 
2. Public consultations. Accord ing to this option the ESRB would involve all concerned 
stakeholders through an open consultation usi ng different means (internet, public hearing 
etc.) and deciding on a case by case basis th e delay for the collection of inputs.   
3. Through a stakeholder group. This option implies setting-up an  appropriate framework for 
a structured dialogue with relevant stakeholders (ind ustry, consumers, workers, 
academics). A permanent stakeholders group would be then established to advise 
regularly the ESRB  
4. Ad hoc consultations. The ESRB could consul t relevant stakeholde rs as appropriate. 
5. Other advisory bodies, such as an Advisory  Technical Committee. Under this option the 
ESRB could be assisted by an Advisory T echnical Committee which would reflect the 
composition of the Board, i.e. it will include a representative of each national central bank 
and of each national supervisory authority of the Member States, two representatives of the European Commission and one representa tive of the EFC. The existing Banking 
Supervision Committee would provide the basis for setting-up the Committee. 
6. Ad hoc consultations + Adviso ry Technical Committee. Unde r this option, consultations 
would comprise both the Advisory Techni cal Committee as well as any relevant 
stakeholders as appropriate. 
 
 5.2.3. Funding of the ESR B: the Secretariat  
 Regarding the set-up of the Secretariat in charge of assisting the ESRB in carrying out its 
tasks - both on the administrative/logistic side and on the statistical/analytical issues – the 
following options have been identified:  
1. As baseline scenario we assume the absence of any Community initiative, i.e. the 
decision to live with the cu rrent (inadequate) EU arrange ment for macro-prudential 
oversight and not establishing any EU Body (and related support structure) in charge 
of the detection of systemic risks an d identification of remedial actions.  
 
2. European Central Bank. The European Central Bank would make available the 
resources necessary to ensure the analytical , statistical, administrative and logistical 
22 support to the ESRB. The Secr etariat will be staffed w ith European Central Bank 
officials, and staff seconded from other Cent ral Banks around the EU  as appropriate. It 
will largely build on the well established network with national Central Banks and Supervisory Authorities on the extensive intern al work in relation to European Central 
Bank/ESCB functions on financial stability monitoring. 
 
3.   Commission ("EFC model"). The Commissi on would be responsible for the provision 
of the analytical, statistical , administrative and logistic al support to the ESRB and 
would undertake this internal ly, by setting up a dedicated unit within the Directorate 
General for Economic and Financial Affairs. The Structure would be similar to that 
provided to support the work of the EFC a nd of the EPC and would be managed by a 
Director, assisted by a group of  officials. The Secretariat could be organized in 4-5 
Units (according to geographical compet ence + one Unit for inter-institutional 
relationships and international relations and one for the organization of the ESRB 
meetings). The Structure could be eith er integrated into the Directorate 
"Macrofinancial Stability" or be under the direct responsibility of the Director-General 
to give it prominent political visibility. 
 
4.   A virtual network of Central Banks. Unde r this option the statistical and analytical 
work would be performed by the single Central Banks building on (the enhancement of) the existing network structures.  It would also comprise a small secretariat 
provided by the European Central Ba nk (around 10 people) which would be 
responsible for the day-to-day management  of the network and to deal with the 
administrative and logistical support to th e Board, including organization of meetings. 
The European Central Bank secretariat would also ensure overall coordination of the 
network, including harmonization of methodologies  and analytical tools. Each Central 
Bank would largely build on the structures al ready in place to fu lfil their stability-
related tasks. Central banks perform overall surveillance and analysis of the financial 
system (macro-prudential analysis). Analys es are undertaken to identify the effects 
that financial system structures, structural  changes and integration developments have 
on financial stability. 
  
6. Preliminary analysis of im pacts and comparison of options 
 
In this section, the following score system is us ed for the analysis of impact of the options: 
• Positive effect: from slightly posi tive (+) to strongly positive (++++) 
• Negative effect: from slightly negative  ( - ) to strongly negative (- - - -)  
• No impact: 0 
 
 
23 6.1. ESFS 
 
6.1.1. Powers and competences of  the Authorities in the ESFS 
 
6.1.1.1. Powers to ensure a single set of harmonised rules  
 
The existing procedure (baseline scenario) pr ovides for the Commissi on to develop Level 2 
detailed implementing rules in areas specified at  Level 1.  This approach is complemented by 
Level 3 non-binding guidelines developed by the exis ting European supervisory committees.     
 However, as has been seen from the recent fina ncial market disruption, a strengthening of the 
single market in financial services to ensure consistent application and minimise regulatory 
arbitrage is necessary.  This ma y mean in some cases areas that were previously guidelines 
should be mandatory.  Additionally, given that financial service providers and markets can 
rapidly evolve, in some areas, even more ra pid updating of standards is necessary.  These 
areas often cover issues best le ft to supervisory experts to agree on.  Finally, there may be 
new areas following on from the financial ma rket disruption where more detailed/amended 
standards will be necessary. 
 
Against this background, option 1 allows for the development, in certain pre-specified areas, 
of draft technical standards to  complement Level 2 implemen ting measures.  In the past, 
standards and guidelines published by Level 3 committees have provided very valuable 
guidance for the correct incorpor ation of EU legislat ion into national frameworks.  However, 
since they are non-binding, they have not in all cas es been able to play the role of effective 
legislation.   This option would reinforce those standards by granting the European Supervisory Authorities 
the capacity to submit draft technical standards . Wh ere appropriate, transforming non-
binding Level 3 measures binding would repr esent a significant step towards a single 
European rulebook.   However, this capacity would be rightly limited to those area s to be define d in sectoral 
legislation.  Additionally, in developing the actual standard s, the Authorities should use 
appropriate market analysis and consultati on procedures before submitting the proposed 
standards to the Commission.  This issue should be tackled in the sectoral legislation by 
defining the precise areas where the European S upervisory Authorities will have the power to 
propose binding technical rules
8.  As a safeguard, the empowe rment for the authorities to 
develop standards would normally remain at Level 1. 
 
Granting the European Supervisory Authority the power to autonom ously adopt binding 
technical standards (option 2) is not legally feasible. Thus, the ability to submit draft 
standards for adoption by the Commission is the most effective way to ensure a single set of harmonised rules.     From the point of view of cohe rence, the Authorities are effec tively a strengthened network of 
national supervisors.  The Authorities are ther efore  best placed to identify the standards 
which are necessary. In this re gard, the other competences and powers entrusted to European 
                                                
 
8 See annex 3 for the areas in sectoral legislation which have been identified for the use of such a procedure for 
binding technical rules. 
24 Supervisory Authorities provide them with th e appropriate knowledge to develop technical 
standards. Thus, this competence is coherent  with the proposed set of powers and tasks. 
 Table 1. 
Options Assessment criteria 
Single rule book Effectiveness Efficiency Coherence 
1. Baseline (Non-binding guidelines 
and recommendations) 0 0 0 
2. Baseline + proposals to the 
Commission for binding standards ++ +++ +++ 
 
 
6.1.1.2. Powers to bring about c onsistent application of EU rules   
 
The efforts to pursue a greater harmonisation of EU rules would be pointl ess if such rules are 
later applied inconsistently. The desired level of convergence in  the supervision of financial 
institutions across the EU re quires not only a single set of harmonised rules, but also a 
consistent application of such rules and co mmon supervisory practi ces. Consequently, it 
would be coherent to entrust al so the European Supervisory Au thorities with this task.   
 
The European Supervisory Authorities should  facilitate coordination and joint decision-
making between the national supervisors when applying EU rules. While fulfilling this task, the European Supervisory Authority should additi onally verify the correct  application of EU 
rules.  Two issues are involved under th is heading: (i) settlement of  disagreements between national 
supervisors, and (ii) procedure for breaches of EU legislation 
 Regarding settlement of disagreements betw een supervisors, the European Supervisory 
Authorities must coordinate the ac tions of supervisors to ensure a consistent application of EU 
rules. Nevertheless, this mediation may not be sufficient in those cases where there is a strong 
discrepancy between supervisors. Discussions between national supervisors are often blocked 
by conflicting interests or points of view. In these circumstances , it is essential to create a 
mechanism which allows the supervisor to arbitr ate and provide a solution to the controversy.  
 Concerning incorrect or inconsiste nt application of EU rules, the two alternatives envisaged 
are either granting the Europ ean Supervisory Authority the capacity to take decisions 
requiring national supervisors to apply Community law correctly or just the possibility to 
issue a recommendation apply Community law correctly. The preferred option is the capacity to issue recommendations, with the possibility  for the Commission to make such warnings 
binding if not followed by the nati onal supervisor in question.  
 To overcome exceptional situations of pers istent inaction by the competent authority 
concerned, the Authority could be  empowered, as a last resort, to  adopt decisions addressed to 
individual financial institutions. This power  should be limited to areas of Community law 
directly applicable to financial institutions, and defined by the subject matter and conclusions 
in the Commission decision which it has to fully respect.   
25  
   
Table 2. 
Options Assessment criteria 
Consistent application of rules Effectiveness Efficiency Coherence 
1. Baseline (no powers) 0 0 0 
2. Mediation role + ++ + 
3. Mediation + binding decision-making 
powers in case of disagreement ++ ++ ++ 
4. Mediation + 3 + power to warn of 
manifest breaches of EU law +++ +++ +++ 
5. 4 + power to adopt decisions 
addressed to market operators ++++ +++ +++ 
 
 
6.1.1.3. Ensure a common superviso ry culture (including colleges of 
supervisors)  
 
Until now, one of the main tasks of the Committees  of Supervisors has been to contribute to 
the consistent applicatio n of Community directives and to the convergence of Member States' 
supervisory practices throughout the Commun ity. As mentioned in the Communication 
"European Financial Supervision" of 27 May 2009, the new European Supervisory Authorities 
will take on all the missions of the current Committees of Supervisors.  It has been mentioned previous ly that the new Authorities s hould contribute to promoting the 
efficient and consistent functioning of college s of supervisors and monitoring the coherence 
of the implementation of Community legislation across these colleges. Against this background, they should particip ate as observers in colleges of supervisors and receive all 
relevant information shared between the member s of the college. The question is whether the 
European Supervisory Authorities s hould be required to participate in all colleges of 
supervisors or leave it up to the Authorities to decide in which colleges they want to 
participate.   From the point of view of effectiveness, the involvement of the European Supervisory 
Authorities in all colleges of supervisors would ensure a high degree of consistency as it 
would gain a complete overview of all the key regulatory and market developments in the EU. 
From the point of view of efficiency, requi ring the European Supervisory Authorities to 
participate in all colleges of s upervisors would imply very high costs, while the advantages of 
such presence are not guaranteed. The most pragma tic solution therefore seems to be to leave 
the decisions on the participation in individual colleges up to the Authorities, as they are  best 
placed to make consider the trade-off between effectiveness and efficiency. 
 
26 Table 3. 
Options Assessment criteria 
Colleges of supervisors Effectiveness Efficiency Coherence 
1. Baseline (same powers as current 
Committees) 0 0 0 
2. Baseline + power to participate in 
colleges of supervisors +++ +++ +++ 
3. Baseline + 2 + requirement to 
participate in all colleges of supervisors ++ + ++ 
 
 
6.1.1.4. Full supervisory powers  
 
In May, the Commission announced the possibili ty of granting the European Supervisory 
Authorities responsibility for th e supervision of entities with  a Community-wide reach (such 
as credit rating agencies or pos sibly central counterparty clea ring houses). The supervision of 
such entities involves  a clear Community dimension. For example, central counter party 
clearing houses can process and se ttle operations from a large number of states and credit 
rating agencies based in one country can issu e ratings which affect a large number of 
countries. Consequently, it is not optimal that a single national author ity should be entrusted 
with the task of supervising them. From this perspective, granting this  power to a European 
body could be more effective and coherent th an sharing this competence with national 
supervisors. It would also be more efficient as it would concentrate the costs of supervision in 
only one authority avoiding any overlaps.  In this context, entities with a Community-wide reach refers to entities which by their nature 
can operate throughout the EU. It does not refer to  cross-border financial institutions which 
are supervised by national supervisors operating in colleges of supervisors.  A hierarchy of 
possibilities is thus established: for national en tities supervision is totally national, for cross-
border groups colleges of supervisors is key, and for entities with a Community-wide reach there is the possibility of European supervision. 
 It is logical to introduce the possibility of  granting such powers to  all three Regulations 
creating European Supervisory Auth orities, in case it is in future decided to grant supervisory 
powers to the ESAs for any entities in the ar eas of banking or insurance and occupational 
pensions. Then in such cases, EU  supervision could be introduced  with a sectoral legislative 
act, without any need to  amend the Regulation founding the Au thority in question. However, 
in the short term, only Credit Rating Agencies are envisaged for the po ssible introduction of 
EU supervision. This would involve an am endment to the Regulation on Credit Rating 
Agencies.  
27 Table 4. 
Options Assessment criteria 
Single rule book Effectiveness Efficiency Coherence 
1. Baseline (no powers) 0 0 0 
2. Full supervisory powers only for 
entities with a Community-wide reach +++ +++ +++ 
3. Supervisory powers only for entities 
with a Community-wide reach shared 
with national supervisors  + - + 
 
 
6.1.1.5. Powers in emergency situations  
 
 
From the point of view of effectiveness, the prime objective is to  respond to emergency 
situations with highly coordi nated and harmonised measures. As  already noted, the European 
Commission will define when a emergency situ ation exists and the powers under discussion 
here can be invoked.  The fact that the responsibility for emerge ncy management over loca lly incorporated and 
supervised entities of cross-bor der groups is predominantly nati onal-based heightens the need 
for close EU coordination in these demanding tim es. Growing financial integration in the EU 
has fostered the development of large cross-bor der entities. Consequent ly, there must be an 
evolution towards a more integrated management  of emergency which affect those entities. 
This implies information sharing and joint responses to the problems which are identified.  The first option relies solely on a higher willi ngness of Member States to increase cooperation 
after the present emergency. As me ntioned earlier, one of the less ons that have been extracted 
from this emergency is the need for more ha rmonised solutions to the financial turmoil. 
National authorities are more aware of this prob lem and therefore, are expected to act in a 
more coordinated way in the future. However, this may seem insufficient in view of the 
magnitude of the problems which may occur.   There is therefore a strong case for new initi atives to increase c ooperation amongst national 
authorities. European Supervisory Authorit ies would enhance coor dination by ensuring a 
better flow of information between national authorities and also, by assisting national 
supervisors in the definition and correct timi ng of the measures to be taken. In their 
overarching position, the new authorities would re duce frictions between national authorities 
by analysing both the requests for information and the need s for action under specific 
circumstances in order to determine the correct  line to take. This mediating role would 
facilitate the adoption of remedial actions and increase the swiftness and effectiveness of such 
measures.   As for the possibility of granting decision- making powers to the European Supervisory 
Authorities, it seems clear that this option would eliminate obstacles and accelerate the 
adoption of measures to a given problem. Certai n problems like short-selling of shares for 
instance, require rapid and sync hronised actions. In an emerge ncy situation, these decisions 
have to be adopted on an EU wide basis to avoid unequal implementation of the measures and 
ensure their effectiveness.  
28  
In the past, emergency have revealed to which extent national interests may collide and hamper the management of the emergency. Conse quently, it is coherent with the objectives 
set forth in the Communication to envisage a mechanism which can improve the management of the emergency by providing coordinated respon ses to the problems, as well as ensuring that 
no decision by the Authorities impinges on the fi scal responsibilities of the Member States. 
 
Table 5. 
Options Assessment criteria 
Coordination in crisis situations Effectiveness Efficiency Coherence 
1. No powers 0 0 0 
2. Coordination powers ++ ++ ++ 
3. Binding decision making powers 
in emergency situations +++ +++ +++ 
 
 
6.1.1.6. Powers to collect and manage micro-prudential information:  
 
 The most appropriate option with regard to collection of information depends on the other 
competences and powers selected for the European  Supervisory Authoritie s, and is the option 
which allows it to fulfil its functions correctl y, with no more and no less information than it 
needs for its tasks. "Effectiveness" in this respect means effectiveness for carrying out its 
tasks, and "coherence" means primarily cohere nce with the other task s and competences of 
the European Supervisory Authorities.   The European Supervisory Authorities will not be able to carry out any functions, and will 
therefore have zero effectivene ss, without access at the minimu m to the information currently 
received by the Level 3 committees, the anon ymised and aggregated  data. Without this 
information they will have a very limited insight into developments in their sector in Europe, limited to public sources such as the press. The issue of whether the European Supervisory Authorities should share this or  any other information, with th e ESRB is discussed elsewhere, 
in the ESRB part of this report.  The baseline should therefore constitute the minimum for the 
European Supervisory Authorities, in terms of access to information. 
 Considering ad hoc information-gathering power s, the European Supervisory Authorities will 
not be able to exercise the powers proposed fo r them without relevant information. It would 
therefore be both effective and coherent for Eur opean Supervisory Authorities to be able to 
request national supervisors to provide the inform ation needed to carry out any area of their 
work, including the general assessment of market  developments, on the basis of a motivated 
request. This would certainly generate costs, but if the information is already in the possession 
of the national supervisory authority, the additional cost should be limited. 
 It should also be considered whether the Eu ropean Supervisory Authorities should have the 
power to gather information regarding individual financial institutions which is not already in 
the possession of national supervis ory authorities, and if so, whether they should be able to 
approach financial institutions directly or onl y via national supervisory authorities. European 
Supervisory Authorities may also need access to  information regarding individual financial 
29 institutions which is not in the possession of na tional supervisors. In such cases it will be 
more efficient for them to be able to obtain the information directly from financial institutions.   With regard to information for colleges of supervisors, clearly the European Supervisory 
Authorities will not be able to participate in colleges in any meaningful way without access to 
all of the information which is  available for the co llege. More fundamentally, it has been 
considered above (6.1.1.3.) that European Superv isory Authorities should play a significant 
role with regard to colleges of supervisors, facilitating them and ensuring that all national 
supervisors are fully informed. This requires th e European Supervisory Authorities to have a 
role defining and collecting information for a ll colleges of supervisors. This involves the 
management of a database of information or iginating from home and host supervisors for 
meetings of colleges of supervisors. Goi ng beyond this, in order to ensure coherent 
information, the European Supervisory Author ities should lay down the minimum information 
which home and host supervisors should circulate pr ior to meetings of colleges of supervisors. 
 While this role regarding information for me etings of colleges of supervisors can be 
considered both effective and coherent, as de fined above, it might be considered as not 
efficient, especially as it would incur high cost s, particularly with regard to the maintenance 
of a database (the precise cost s are considered below). Howeve r, centralised distribution of 
information for colleges of supervisors would be more efficient than the alternative, which would involve all relevant nationa l supervisors distributing inform ation separately to all other 
national supervisors attending the meeting. 
 
Table 6. 
Options Assessment criteria 
Information collection (general) Effectiveness Efficiency Coherence 
1. Baseline (aggregated, 
anonymised information) 0 0 0 
2. Baseline + ad hoc information 
gathering powers via national supervisors ++  + +  + +  
3. Baseline + ad hoc information 
gathering powers directly from 
financial undertakings + ++ + + + ++ 
    
 
Table 7. 
Options Assessment criteria 
Information collection (related to 
colleges of supervisors) Effectiveness Efficiency Coherence 
1. Baseline (no information) 0 0 0 
2. Receive all information for 
colleges of supervisors + + + 
3. option 2. + management and 
distribution of information for colleges of supervisors + + + + + + 
 
30  
6.1.1.7. Safeguard for fiscal res ponsibilities of Member States  
 
The issue is to lay down provisions which ensu re that European Supervisory Authorities do 
not take decisions which impinge on the financ ial responsibilities of Member States, without 
preventing European Supervisory Authoritie s from taking other decisions, which do not 
impinge on the fiscal responsibilities of Member States.      It is however of high importanc e to ensure that the safeguard clause is not abused by Member 
States. Its use should therefore be  limited to well-justified cases so as to avoid disrupting the 
effective functioning of the Authorities. To ach ieve this, clarity about how and when the 
process can be triggered, and how  it is judged, is essential.   
 The first and second options woul d be broadly similar, in that  they would not provide legal 
clarity as to the definition of decisions which impinge on the fiscal resp onsibility of Member 
States, the procedure to be followed or the ini tiator of the proceedings. The third option would 
give Member States a wide power of appr eciation and intervention regarding European 
Supervisory Authority decisions, and would allo w them to judge when the safeguard clause 
applies or not, and could ultimately undermine th e effectiveness of the Authority if misused. 
The fourth option would allow European Superv isory Authorities to ad opt decisions, which 
Member States can challenge if they consider the safeguard clause to be triggered. Should the 
European Supervisory Authority not withdraw or revise its decision, the matter would be 
referred to the Council, which would take a decision using qualifie d majority voting. 
 A broad prohibition of taking an y decisions which might, directly  or indirectly, impinge on 
the fiscal responsibilities of Me mber States, could considerably reduce the scope of activity of 
the Authorities. On the other hand, a genera l and imprecise statement that European 
Supervisory Authorities must not impinge on th e fiscal responsibilitie s of Member States, 
without specific remedial mechan isms in place in case they do so, would not protect the fiscal 
interests of Member States. Neither of these op tions would therefore be  effective in achieving 
the desired objective.  Only a safeguard procedure could provide a rigo rous framework for determining if a decision 
by a European Supervisory Authority could genui nely impinge on the fiscal responsibilities of 
Member States, with an ultimate decision being taken by the Council under QMV. Such a 
procedure might be considered to be burdensome, but the very  length of the procedure should 
lead to it being used sparingly and only in cases where genuinely important fiscal issues are at 
stake. To balance the risk that this pro cedure could be overly burdensome, it may be 
appropriate to provide for a more expedited pr ocedure in the case of emergency situations 
compared with day-to-day supe rvisory decisions.  However, regardless of this difference, 
ultimately, the decision should remain subject to the Council procedure outlined above. 
    
31 Table 8. 
Options Assessment criteria 
Safeguard Effectiveness Efficiency Coherence 
1. Baseline (no explicit safeguard) 0 0 0 
2. General safeguard clause + + + 
3. Member State veto over 
European Supervisory Authority 
activity - 0 + 
4. Formal safeguard procedure 
based on Council Decision 1999/468 ++ +. + + + 
 
 
 6.1.2. Organisation and structure of the Auth orities in the ESFS 
 
6.1.2.1. Joint Committee of Eu ropean Supervisory Authorities
  
 
A Joint Committee would play a key role in ensuring consistency of outcomes between the three authorities. Therefore, the option of ha ving no Joint Committee would be ineffective, in 
that it would require the Joint Committee on Fina ncial Conglomerates to remain in place as a 
relic of the old Level 3 committ ees and would risk divergences in approach between the three 
Authorities. It would also render the concept of a network-based ESFS rather empty. In terms 
of efficiency, it would save some travelling cost s but could engender greater costs in the long 
term if diverging approaches between different  European Supervisory Authorities require ex-
post intervention in order to remedy their effects.   A Joint Committee with no legal personality coul d replace the JCFC, co-ordinate informally 
between the three European Supervisory Auth orities, without being encumbered by legal 
requirements. Its informal nature could incr ease its effectiveness,  it would involve no 
operational costs (other than mission expenses), and it could be served by staff of the ESAs. 
The Executive Director, the Commission and the European Systemic Risk Board (to ensure effective coordination between the ESFS and ESRB) would attend Joint Committee meetings, 
and other participants, at the discretion of the Joint Committee. The Joint Committee on Financial Conglomerates would in this case be replaced by a subcommittee of the Joint 
Committee, with broadened membership, includi ng appropriate representatives of Member 
States. 
 
Regarding the option of a Steering committee with  legal personality, this option may have a 
positive score on effectiveness as it could adopt legal acts obliging coherent interventions by 
the three European Supervisory Authorities. Bu t it is not certain that such acts would be 
necessary. It might be inefficient, as a Join t Committee with legal pe rsonality could engender 
extra costs such as for a secretariat. A possi ble disadvantage of a Joint Committee with legal 
personality is potential overlap with the three ESAs and blurring of re sponsibilities. On the 
other hand, a potential advantage of  a Joint Committee with legal personality is that it could 
take decisions on conglomerates, removing the need for the European Banking Authority and European Insurance and Occupational Pensions Authority to take separate and identical 
32 decisions, following co-ordination (which would be necessary with a Joint Committee with no 
legal personality); this could lead to a mo re fragmented and less coherent approach.  
 Overall, it is considered more prudent to have  a Joint Committee with no legal personality for 
the moment, pending the outcome of the first review of ESFS functioning. 
 
Table 9. 
Options Assessment criteria 
Steering committee Effectiveness Efficiency Coherence 
1. Baseline (no Joint Committee) 0 0 0 
2. Joint Committee with no legal 
personality + + + + + + + + + 
3. Joint Committee with legal 
personality + + + + + + 
 
 
6.1.2.2. Voting procedure  
 
Concerning voting procedures, the baseline is QMV as applied in the level 3 committees. For 
the purposes of adopting proposals for binding techni cal standards, it would be coherent with 
the adoption procedures for other binding acts, to  retain the use of QMV, since the role of 
European Supervisory Authority voting members in that case would be similar to that of 
Member States. The use of QMV excludes the chairman having a vote, as he will not be 
representative of a Member State; however  there remains the question of whether the 
chairman should vote when simple majority voting applies.  For other matters, simple majority voting would b e  a p p r o p r i a t e ,  a s  Q M V  i s  m o r e  s u i t a b l e  
when the Authorities are adopting draft horizontal legislative and quasi-legislative acts which will apply in the whole of the EU, including guidelines and recommendations, and also for 
budgetary and financial matters. On the other hand, for individual acts  of the Authorities 
concerning specific cases a simple majority votin g procedure would be adequate, as such acts 
are implementation of Community  legislation already adopted. 
 It should be laid down in the acts creating the ES As that members of the Board of Supervisors 
must always act in the Community interest a nd not represent Member States. Conflicts of 
interest should thus be avoided. In voting in the Board of Supervisor s on dispute settlement 
issues, the representatives of s upervisors involved in the disagreement can be expect to vote in 
different ways, thus eliminating each other.    
33 Table 10. 
Options Assessment criteria 
Voting Effectiveness Efficiency Coherence 
1. Baseline (QMV on all decisions) 0 0 0 
2. Majority voting + + + 0 
3. Mixed QMV and majority voting, 
depending on subject matter + + +  +  + 
    
 
 
6.1.2.3. Liaising with relevant  stakeholders including consumers:   
 
In terms of effectiveness, the lack of any ki nd of stakeholder consulta tion other than ad hoc 
public consultations can be dism issed as leading to poor qual ity interventions. Holding open 
public consultations on every act  of the European Supervisor y Authorities would also be 
inefficient. It would also be incoherent with practice in other agencies  which have stakeholder 
consultation panels. This opti on can therefore be dismissed. 
 The option of one stakeholder gr oup for all three Eur opean Supervisory Authorities (that is, 
for the ESFS as a whole) could be considered  as effective and efficient, while broadly 
coherent with existing practice, as long as th e ESFS is considered as a unity and not three 
totally separate Authorities. The existen ce of a Joint Committee underlines this unity. 
 Constituting separate stakeholder consulta tion groups for each European Supervisory 
Authority would however be more effective, as each group would be composed of experts on 
the sector in question. However, it would be less efficient, as it would be costly in terms of 
holding three times as many meetings and missions . It would also be c oherent with practice 
for existing agencies, which each have their ow n stakeholder group. This is therefore the 
preferred option.  The constitution of ad hoc stakeholder group s per issue would be highly inefficient and 
expensive, without any guarantee of better qual ity input than with a permanent stakeholder 
group. This practice is not curre ntly followed in any agenc y, and thus scores low on 
coherence.  
34 Table 11 
Options Assessment criteria 
Stakeholder consultation Effectiveness Efficiency Coherence 
1. Baseline (ad hoc public 
consultation only) 0 0 0 
2. Separate stakeholder groups for 
each European Supervisory 
Authority + + + + + + + 
3. One stakeholder group for all 
three European Supervisory 
Authorities in the ESFS + + + + + + 
4. Ad hoc stakeholder groups + + - - 
 
 
6.1.3. Financing the Au thorities in the ESFS 
 
The total costs of creating the European Supervis ory Authorities have been estimated at about 
37 million Euro in the first full year of opera tions (2011), reaching over 68 million Euro after 
three years (2014) – see Table 24 in Chapter 7.3. 
 
The cost of functioning of the new Authoriti es could be covered from various sources, 
including contributions from national supervisors, a subsi dy from the Community budget, 
own revenues from fees and licences (this is linked with direct supervisory powers over 
Credit Rating Agencies and will  only be relevant for the European Securities Markets 
Authority).   The practice adopted in the L3 Committees is th at the national contributions are proportionate 
to the weight of the Member State concerned in  the qualified majority  voting arrangements in 
the Council. This system could be maintained in  the European Supervisory Authorities, or an 
alternative system of allocation, for example,  based on relative Gross National Income, could 
be used. Since their own revenues (i.e. from fees and licences) are expected  to be of marginal 
importance, at least in the firs t stages of operation, the funding will basically have to come 
from national contributions and the Community  subsidy. There is a full spectrum of 
possibilities for sharing the cost s between these two main sources . Some illustrative options 
are presented in Table 12 below.   
Table 12. Illustrative options for Europe an Supervisory Authorities' funding 
In thousands € 
      2011 2012 2013 2014 
Total costs for EU 
and MS     37.263 51.268 60.639 68.426 
Option 1 National contributions 100% 37.263 51.268 60.639 68.426 
(the baseline) Community subsidy 0% 0 0 0 0 
Option 2 (a) National contributions 80% 29.810 41.015 48.511 54.741 
  Community subsidy 20% 7.453 10.254 12.128 13.685 
Option 2 (b) National contributions 60% 22.358 30.761 36.384 41.056 
  Community subsidy 40% 14.905 20.507 24.256 27.370 
35 Option 2 (c) National contributions 50% 18.631 25.634 30.320 34.213 
  Community subsidy 50% 18.631 25.634 30.320 34.213 
Option 2 (d) National contributions 40% 14.905 20.507 24.256 27.370 
  Community subsidy 60% 22.358 30.761 36.384 41.056 
Option 2 (e) National contributions 20% 7.453 10.254 12.128 13.685 
  Community subsidy 80% 29.810 41.015 48.511 54.741 
Option 3 National contributions 0% 0 0 0 0 
  Community subsidy 100% 37.263 51.268 60.639 68.426 
 
Source: Commission calculations 
 
As regards Option 1 – the baseline – one common argument raised in favour of 100% Member State financing is the need to ensu re independence of the new Authorities from 
excessive influence of European institutions. However, experience with existing EU regulatory agencies, which are mostly fully f unded through the EU budget, suggests that they 
enjoy a significant degree of independence. The arguments that the EU subsidy would 
compromise the independence of the new Au thorities therefore doe s not seem to be 
substantiated.   100% funding from the Member States on one ha nd would not entail any additional expense 
from the Community budget. But on the other ha nd, it would have as a consequence that the 
EU Financial Regulation would not apply and there would be no automatic requirement for 
Parliamentary discharge for the budget
9. This could be perceived as reducing controls and 
increasing risk. Finally, the exclusive national financing would be incoherent with the EU 
principle of solidarity and the le vel playing field in the Intern al Market. National supervisors 
use a variety of funding models at national le vel - some from general taxation, some from 
levies on the industry.  Thus the costs linked with financing the ESAs would have to be 
passed directly on to the indus try or indirectly to the ta xpayers. Given unequal sizes and 
levels of development of financial sectors in  various MS, the contri butions to the ESAs 
calculated according to the weights in the C ouncil voting mechanism could be contested by 
some countries. Opposition could be expected especially from the Member States with relatively small financial sectors as compared to  the number of their QM V votes, especially in 
the context of budgeta ry strain in the post-crisis period.  
 The Option 2 and 3, i.e. the Community financing in  part or in full, implies the application of 
the Financial Regulation, with all the checks and cont rols it involves. This would guarantee 
the transparency of the ESAs' internal fina ncial procedures and s upport their accountability. 
They would be subject to oversight by the es tablished Community framework for financial 
audit and control. This would help to pr otect the ESAs from fraud or any kind of 
fraudfinancial abuse.  
The need for Community funding is also particular ly important to ensure that the Authorities 
are truly independent from Member States. The choice has been made, in order to limit as much as possible interferences in the technical work of supervisors, to limit the Commission's 
participation to the minimum in the superv isory boards of the Authorities (with one non-
voting member) and the management boards (with one  voting member). If there were to be in 
addition an excessive reliance on Member St ates' contributions, the credibility of the 
Authorities' independence would be seriou sly put at risk. A si gnificant Community 
                                                
 
9 The Parliament could, however, establish itself as a discharge authority. 
36 contribution is needed to compensate for the limited role which is being given to the 
Commission in the decision-maki ng bodies of the Authorities; 
Besides, experience with the existing EU ag encies shows that the Community financing 
guarantees the stability of reve nues. In case of mixed funding a rrangements (for agencies with 
some own revenues), the Community subsidy us ually tops up other types of revenues to 
ensure the necessary budget fo r conducting the statutory opera tions. Such a solution could 
also be foreseen in the case of  a mixed financing with contributions from national supervisors. 
Excluding Community financing completely to re ly on national contributi ons would entail the 
risk of budgetary problems in case one or severa l Member State(s) for whatever reason fail(s) 
to contribute. 
 
In light of the above arguments, it seems that  the involvement of the Community in financing 
of the ESAs would be beneficial in comparison to the baseline, i.e. financing exclusively by 
the Member States. It could contribute positively to the effectiveness  of the new Authorities 
by ensuring their stable financing and th us operations while not endangering their 
independence. At the same time, the applic ation of EU financial control and audit 
mechanisms is likely to enhance the ESA’s efficiency . Funding or co-funding from the 
Community budget also seems to  be in all ways more coherent with other EU objectives and 
policies than 100% Member State financing. On the other hand, full funding of the ESAs from 
the Community budget is not coherent with the appropriations planned in the 2007-2013 
financial perspective.  
Table 13. 
Options Assessment criteria 
Financing options Effectiveness Efficiency Coherence 
1. Baseline: 100% funding by MS 0 0 0 
2. Mixed funding by MS and EC (60% - 
40%) ++ ++ ++ 
3. 100% funding by EC ++ ++ + 
 
Within the Option 2, a Sub-option 2b whereby it is proposed that the Community budget 
funds 40% of the costs and Member States fund the 60% is suggested as the optimal solution. 
The reasons for this choice are the following: 
• a well-balanced financing is the best way to ensure that the Authorities act (and are 
perceived to be acting) independently of  Member States and of the Community 
institutions. If one particular source of funding were to be overly dominant, this could cast 
a shadow on the credibility of  the decisions made by the Authorities and thus undermine 
the new framework proposed to safeguard financial stability; 
• given that national supervisors will continue, in this new framework, to carry out the bulk 
of supervisory activities on the ground, it seems a ppropriate to reflect this in a slightly 
higher contribution from Member States. In doing so, allowance should be made for a 
smooth evolution from the present situation where the level 3 committees are almost exclusively funded by Member States;  
37 • however, it is of the essence that a signi ficant part of the funding comes from the 
Community budget. Indeed, the ne w Authorities will serve obj ectives which have a clear 
Community dimension: preservi ng financial stability in the Internal Market as well as 
sustainable growth in  the EU. Moreover, one of the Authorities' core  tasks and powers is 
to ensure a consistent, efficient and effective application of Community  rules in the sector. 
This justifies, at least, a 40% funding from the Community budget (as most of these 
entities are normally fully funded through th e Community budget). Furthermore, one can 
doubt whether all Member States will be able to cope with the sharp increase in their 
contributions that would be required under th e new framework, which will be much more 
costly than the present level 3 arrangements;  
• this approach is the most conducive to stab le funding, with no over-reliance on one source 
or on contributions from big Member States who could threaten the continued operation of 
the Authorities by putting an end to their financial contributions. Finally, this approach is also more fair than a full or very large funding from Member States. 
 
6.2. ESRB 
 
6.2.1 Powers and competences of the ESRB 
 
6.2.1.1. Follow up mechanism to  warnings and recommendations
 
 
One of the specific objectives outlined above was to "ensure follow up to warnings and recommendations".  The purpose of ESRB wa rnings and recommendations is to bring 
potential systemic risks to the attention of recipients.  However, unlike policies such as 
inflation targeting, there is no quan titative target in the field of systemic risks.  Therefore any 
warning or recommendation is likely to contain some uncertainties and elements of 
subjectivity.  On the other hand, with risks of th is type, the earlier action is taken to mitigate 
them, the more likely the cost of such action an d the probability of the risk materialising will 
be minimised.  Therefore it is important to st rike a balance between incentivising early action 
and not prescribing actions in  the face of uncertainty.  
 The first option, no follow-up mechanism, would significantly lessen the effectiveness of 
ESRB warnings and recommendati ons. There would be a high risk  that addressees may not 
heed the ESRB warnings and recommendations, which would be exacerbated if ESRB acts were not made public (discussed under 6.2.1.4) . However, granting binding powers to the 
ESRB to require compliance from addressees w ould probably be a too rigid and too simplistic 
option and could lead to legal challenges. The purpose of the ESRB  should be to raise 
awareness among Member States, th e ESAs  or national supervis ory authorities on potentially 
unsound financial developments and initiate an ea rly constructive dialogue with addressees on 
possible ways to react. A "comply or explain"  mechanism seems therefore to be the best 
option in terms of effectiveness as it leaves to  the addressees sufficient flexibility to adjust 
while it ensures there is follow up (as specified  in the specific objectives) by requesting them 
to react (complying or explaining)  within a specific timeline.  
 In addition, it could be envisage d that ESRB recommendations, as we ll as the responses of the 
addresses, are transmitted to the Council and, wh ere relevant, to the ESAs. This mechanism 
would help to better co-ordinate the responses in  the case of multiple addressees. The ESAs in 
particular should use their powers to ensure  timely follow-up to recommendations addressed 
38 to one or more competent nation al supervisory authorities. Th is role would contribute to 
ensure a smoother interaction of  supervision at macro-prudentia l and micro-prudential levels, 
which would be fully in line with the system-w ide specific objectives. If the ESRB judges that 
its recommendation has not been properly addresse d and is not satisfied with the addressee's 
explanation, it would inform the Council and, where approp riate, the ESAs. Such a prospect 
should help put pressure on the addressees a nd would certainly help achieving effective 
follow-up to warnings and recommendations, as mentioned in the specific objectives. 
 
Table 14. 
Options Assessment criteria 
Warnings Effectiveness Efficiency Coherence 
1. Baseline (no follow-up mechanism) 0 0 0 
2. Comply ++ - - - 
3. Comply or explain ++ +  ++ 
 
6.2.1.2. Information access  
 
The ESRB needs sufficient information to eff ectively identify macro-pr udential risks and to 
analyse the interconnection with the soundness of  individual financial institutions.  Provision 
of such information should not place undue bur dens on national supervisors or financial 
institutions.  To deliver this objective, the ES RB is likely to need ac cess to a wide range of 
information on financial instituti ons and the financial sector. It would not be possible to issue 
credible warnings and recomm endations without such access to accurate and up-to date 
information. However, gaining this information shoul d be as efficient as po ssible.  In order to 
alleviate the burden on the reporting entities, the ESRB could potentially have access within existing reporting arrangements, channelled through the ESAs. Such an arrangement would 
have the merit of having no impact in term s of additional reporting burden on financial 
institutions. The channelling of information through the ESAs is also a way of enhancing 
cooperation between the macro- and the micro- European supervisor, thus contributing to 
meeting the system-wide objective, as described above.  Being responsible for identifying macro-prudent ial risks, the ESRB would analyse primarily 
aggregated data at the EU or country level. Yet individual institutions can present a systemic 
risk because of their size, their activities or  their cross-border nature. Allowing the ESRB to 
access -under specific circumstances and on reas oned request- individual data would improve 
its effectiveness and be necessary for it to  achieving its objectives. The information on 
individual data could be collected by the ESRB Secretariat and codified for the discussions at 
Board level. Such a solution would have th e advantage not to ru le out discussions on 
individual cases as a single financial institutio n may put financial stability (in one or more 
Member States) at threat and preserve the confiden tiality of the data at the same time.   Before 
a request for data is made, the ESRB would first take account  of the existing statistics 
produced, disseminated and developed by both the European Statistical System and the ESCB 
and then could consult the relevant European S upervisory Authority, in order to ensure that 
the request is proportionate. 
 
39 Table 16 
Options Assessment criteria 
Information requirements Effectiveness Efficiency Coherence 
1. Baseline (no access) 0 0 0 
2. Collection of aggregated data on a 
regular basis ++ ++ ++ 
3. Collection of aggregated data on a 
regular basis + access to information 
on individual institutions upon request +++ ++ ++ 
 
6.2.1.3. Degree of publicity of warnings  
 
It will be important to ensure appropriate follow up to warnings and recommendations.  One 
tool to achieve this is th rough the threat, or the act, of publicising warnings and 
recommendations.  However, there is a need to strike a balance between preserving the confidentiality of certain decisions so as not to create excessive concerns on the markets and 
ensuring the effectiveness of ESRB action by rele asing some decisions to raise awareness and 
enhance market discipline. If the ESRB is  only a silent body, its image among market 
participants as well as with the general public would be limited which may undermine the 
credibility of its warnings. On the contrary, it would not be effective to  require all warnings 
and recommendations to be publis hed as the publicity of such sensitive decisions in itself 
could destabilise the financial system. Pre-defined rules on whether a decision should be made public would give the Board and market participants clear guidance and create an 
incentive for the recipient to demonstrate that they  have addressed the issue.  But it could also 
potentially tie the hands of the Board too much and result in instances of publication when it 
was not appropriate and/or non-publication woul d not have been appropriate. It would be 
more effective and efficient to entr ust the Board to decide whether a 
warning/recommendation should be made public . Given the importance of the decision, a 
qualified majority of two thirds of the votes w ithin the General Board could be foreseen to 
decide on making a warning/recommendation public . When the decision has been made not to 
make a warning/recommendation public, the a ddressees, the Council and the ESAs should 
adopt all necessary measures to preserve the confidentiality of the de cision. More specifically, 
the President of the Council co uld be entitled to decide not  to circulate a warning or 
recommendation to the other members of the Council.  
Table 17. 
Options Assessment criteria 
Publicity for warnings Effectiveness Efficiency Coherence 
1. No publicity (baseline) 0 0 0 
2. All decisions published - - 0 
3.Publication according to general 
principles agreed in advance + - 0 
4. Publication to be decided on a case 
by case basis (as part of the follow-up 
mechanism) ++ + 0 
 
40  
6.2.2 Organisation and structure of the ESRB 
 
6.2.2.1. Size and scope of expertise of the board  
 
The composition of the board is a key issue for the effectiveness of the new body.  It will be 
necessary to have a board which strikes th e right balance between ensuring adequate 
representation of exper tise and views, to ensure there is  adequate pooli ng of information 
about macroeconomic risks for financial stab ility, while at the same time ensuring it is 
flexible enough to be able to issue warnings and recommendati ons effectively and ensuring its 
size is not a limitation to this effectivene ss.  The Commission proposal endorsed by the 
European Council suggests a board comprising:  
• The President and Vice President of th e European Central Bank (2, voting) 
• Governors of each of the EU's Na tional Central Banks (27, voting) 
• One representative of the Eu ropean Commission (1, voting) 
• Representatives of each of the European  Supervisory Authorities (3, voting) 
• One supervisory representative from  each Member State (27, non voting) 
• One representative from the EFC (1, non voting) 
 
The composition in terms of specific individuals  or bodies is ultimately a political decision.  
There is, however, an important judgement to  make around how to ensure the composition of 
the board balances the two key parameters out lined above:  ensuring an  effective size, and 
ensuring balanced representation.  The composition of the board should also contribute to the 
objective of independence of the macro-supervis or, as mentioned in the specific objectives. 
 There are four types of possible members (central banks, supervisors, independent 
individuals/bodies and community institutions) in two possible formulae – with and without 
votes.  Having less voting members than total members will increase the efficiency of the 
Board at deciding on warnings and recommenda tions for a given size, while on the other 
hand, warnings and recommendations will necessarily  represent the views of only that smaller 
group of voting members.  In terms of the types of possible members, to  ensure adequate pooling of information about 
macroeconomic risks, it seems essential to ensure  a significant coverage of central banks.  In 
most Member States, central banks are primaril y responsible for maintaining price stability 
(and therefore wider macroeconomic stability ) through the use of monetary policy, the 
conduct of foreign exchange operations, managi ng the national official  reserves. Moreover 
central banks undertake the macro-prudential over sight at national leve l and are therefore  
used to looking at both financial and the wide r macroeconomic stability.  Thus Central Bank 
members will be in a good position to take an overview of the linkages between developments 
in the financial sector and th e  macroeconomic performance of  EU economic systems.  In 
addition, National Central Banks are indepe ndent bodies and thei r independence is 
safeguarded by the Treaty. Having a large majo rity of Central Banks in the Board would 
therefore contribute to  the objective of independence men tioned above. For all these reasons, 
it seems sensible to ensure that all relevant Central Banks have a prominent place on the 
ESRB. 
  
41 Supervisors, on the other hand, are responsible  primarily for the regulation of financial 
institutions, with the broad objectives of pr otecting depositors and re ducing the likelihood and 
impact of financial institution failure.  They wi ll have the necessary information and skills to 
make judgements about the solvency of individual  financial institutions.  It seems sensible to 
have as wide a representation as possible given the objective of the ESRB to ensure the link 
between macro-prudential and microprudential issu es and to ensure that the ESFS functions 
are carried out effectively in  terms of information flows and informed actions. The 
participation of the ESAs in the board will defi nitely contribute to fulfilling the system-wide 
objective of close cooperation between the macro-and the micro- European supervisor. 
 The Commission, in its macroeconomic monitoring and legislative roles,  and Member States 
in their political role should also be represente d.  However, it is not ne cessary to have a wide 
representation.  Therefore it seems sensible to limit their representation to only one seat. 
 The involvement of other independent individual s should also be considered.  Academics or 
independent experts may have highly relevant and informed assessments and opinions which 
could usefully shape the ESRB's thinking.  Howe ver, as discussed under the assessment of the 
options relating to access to information, it is  likely that the ESRB will be dealing with 
sensitive information in developing warni ngs and recommendations.  Therefore involving 
individuals from outside of the institutional and regulatory framework may prove difficult.  
Additionally, it is unlikely that a single academic  or independent expert would be sufficient 
for all potential situations.  Therefore, as an  alternative, it could be  made possible for the 
ESRB to consult relevant experts and academics as appropriate (see section on 'stakeholders 
involvement').  With the membership options outlined above, the ESRB will be a relatively large grouping.  
The optimal size for a group of this type wi ll depend among other things on the relative 
likelihood of diverging opinions, th e specific individual relationships involve d, the strength of 
the chair and the effectiveness of the stee ring group.  However, one way to increase the 
effectiveness of decision making is to limit the voting members for a given size.  In the 
proposal above around half  of the members are voting member s, including the national central 
banks, the Commission and the Eu ropean Supervisory Authoritie s.  This should help to 
streamline decision making.  It should also help to minimise potential conflicts of  interest, 
given the bulk of ESRB warnings and reco mmendations may go to Member States or 
National Supervisors. 
  
Table 18. 
Options Assessment criteria 
Size and scope of Board Effectiveness Efficiency Coherence 
1. Baseline (fragmented supervision) 0 0 0 
2.Central Banks ++ +++ + 
3.Supervisors + +++ + 
4. Central Banks + Supervisors + EFC 
+ ESAs ++++ ++ + 
5. Independent Authorities + + + 
 
42 6.2.2.2 . Addressees of warnings  
 
One of the specific objectives of the ESRB is to  'issue warnings to the relevant actors and 
recommend the appropriate actions'.  This is closely linked to the scope of warnings and 
recommendations, discussed previously.  It is not possible to specify in advance an 
appropriate scope for potential warnings and recommendations.  It is however possible to 
identify those who might be responsible for ta king appropriate policy or  supervisory action.  
At the EU level, for example, this would incl ude the new European Supervisory Authorities, 
which will be responsible for, among other thi ngs, developing technical standards, ensuring 
compliance among national supervisors with a ppropriate community law and eventually 
direct supervision of some EU wide institutio ns, notably Credit rating Agencies. It is also 
likely to include the Co mmission, which is responsible for fi nancial services legislation and 
ensuring a level playing field between Member States. Howe ver, coverage limited to 
institutions at the European le vel would not cover the full ra nge of possible policy responses 
(in particular if recommendations related to po licy action regarding on e or more individual 
financial institutions), and, in particular, would not include th e policy tools held by Member 
States and national supervisors.  Therefore it would be ineffective and inefficient to limit the 
scope of potential addressees.  For example,  targeting the national competent authorities 
might also be too narrow and not appropriate in some cases (for example,  when an inaccurate 
fiscal policy is the potential source of market bubbles). To conclude, it seems that the most 
effective option to meet the obj ectives of the ESRB would be a range of addressees (Member 
States, competent national superv isory authorities, European Supervisory Authorities and the 
Commission). It is worth noting that some  of the potential addressees of ESRB 
recommendations (ESAs, competent national s upervisory authorities, the Commission) are 
represented on the board, which could be an i ssue as regards the independence of the ESRB. 
This said, the large majority of the board members will be central bankers. Representatives of national supervisory authorities would be non-voting members. An additional safeguard 
clause to protect the independe nce of the ESRB would require the members of the board to 
perform their duties impartially, only bearing in mi nd the objective of financial stability in the 
European Union. This would be a specific prov ision in the Regulation establishing the ESRB. 
 To minimise the cost burden and ensure an effi cient approach it seems unnecessary to include 
individual financial institutions within the sc ope of warnings and recommendations.  Whilst in 
some cases they may be the source of systemic  risks due to their si ze, interconnections and 
complexity, ultimately, responsibility for supervision and regulation lies with Member States.  
Table 19 
Options Assessment criteria 
Addressees of warnings Effectiveness Efficiency Coherence 
1. Baseline  0 0 0 
2. MS only + ++ ++ 
3. Supranational Authorities (ESAs and 
Commission only + ++ ++ 
4.Competent Authorities in MS + + ++ 
5.Competent Authorities + individual 
institutions + + ++ 
6. MS, ESAs, national supervisors and +++ + ++ 
43 Commission 
 
 6.2.2.3. Stakeholder involvement  and other Advisory Bodies 
 
 
The assessment of the opti ons in this section will be done in respect to the firs t three specific 
objectives above since both the objectives of ensuring adequate follow-up to the 
warnings/recommendation and of liaising effectivel y with international organizations seem to 
be less affected. 
The baseline scenario is no stakeholder cons ultation. However, given the mandate of the 
ESRB and the potential wide impact of its initiatives (although it will not have binding 
powers), an adequate level of consultation of the main stake holders would be essential. 
Therefore this option can be immediately dismi ssed. In the light of the wide competence of 
the Body it would be ap propriate to increase the potential sources of advice particularly for 
the most complex analysis. In this respect, limit ing the analytical support  to that provided by 
the Secretariat only would appear inappr opriate in terms of effectiveness. 
As regards public consultation, while a total absence of any consultation would negatively 
impact on the quality of the analysis done by the ESRB, an involvement of the relevant 
stakeholders via public consultations would present quite limited benefits in terms of 
effectiveness. Indeed, a public c onsultation (especially if referred to future possible warnings 
and recommendations) would be not consistent with  the need of preserving the confidentiality 
of certain ESRB analysis and preventing the spr ead of excessive/unjustified concerns in the 
markets. Moreover, such a modality might result  in excessive delays for the ESRB initiatives 
and could determine a rather limited or exceptional re course to it.  In terms of efficiency this 
modality would be quite burdensome for the ESRB in relation to the costs for collecting and 
analysing for each consultation the reactions of an undetermined number of stakeholders. 
The establishment of a permanent stakehol der group (including indu stry, consumers and 
workers representatives as well as academics) w ould represent, as far as the effectiveness is 
concerned, a better solution in comp arison with the previous one, in  particular with regard to 
the need of preserving an ad equate level of confidentiality and velocity of the process . 
Moreover, dialogues with the re levant stakeholders carried out in structured way would 
increase over the time their capacity in dealing with the issues discussed by the ESRB and in 
managing their relationship with the Body.  In terms of efficiency, the consultation of a 
restricted group of people would imply by lower costs than public consultations. 
Nevertheless, according to the broad mandate of the ESRB and the number of issues to be 
monitored, it seems that a certain degree of fl exibility should be granted to the ESRB in 
dealing with the relevant stakeholders. Therefor e it should be up to the Board to decide on an 
ad hoc basis, according to the issues at stake,  on the appropriateness of a consultation and on 
which categories of stakeholders should be consulted. In the end, with respect to both 
effectiveness and efficiency, this solution s eems top be the best one, ensuring a good balance 
between preserving the confidentiality of the process leading to certain ESRB initiatives and 
the need of enriching the analysis w ith as many perspectives as possible. 
In addition to this, a Tec hnical Advisory Committee, putti ng together experts from the 
different institutions participating to the ESRB would appear as a really useful tool to refine the analysis of the Secretariat when appropriate. It would inte rvene exclusively on request by 
the ESRB and could be used to advise on certain complex issues of cross-sectoral nature or 
requiring a more substantial involvement of the micro-prudential supervisors and/or the 
Commission in the preparatory stage. As rega rds the efficiency criterion the (limited) 
44 recurrence of the Committee activation and the fact that it would basically build on the 
existing BSC would mean quite limite d costs of its functioning.   
 
Table 20 
Options Assessment criteria 
Stakeholders' involvement  Effectiveness Efficiency Coherence 
1.Baseline (no stakeholder 
involvement) 0 0 0 
2.Public Consultation only ++ + + 
3. Through a stakeholders group  +++ ++ + 
4. Ad hoc consultation of stakeholders 
and a Technical Advisory Group ++++ +++ + 
 
  6.2.3. Financing of the ESRB: the Secretariat  
 
The assessment will be carried out in relation to the functions to be fulfilled by the secretariat 
i.e. the provision of administra tive, logistical, statistical and analytic al support to the ESRB. 
The analysis of the impact of the various opti ons, including that regard ing the cost-efficiency 
criterion, will be undertaken in qua litative terms only. This is due to the fact that it has been 
not possible at this stage to obtain sufficien t elements to envisage the likely practical 
arrangements and the division of  work between the Secretariat (particularly for options 1 and 
2) and national central banks and supervisory authorities. This has made it impossible to 
clearly identify, i.a., the staffing needs for the different options and the set-up costs, including 
those for IT equipment (where appropriate). Fo r the favoured option, i.e. the provision of the 
secretariat by the ECB, it has not been possible to evaluate the impact on the ECB's budget as 
the latter does not envisage setting up a dedica ted structure but would rather leverage the 
staff, resources and expertise of various depa rtments in the ECB, depending on the issues to 
be analysed. It was therefore not possible to determine upfront  e.g. the number of full-time 
equivalent staff which would work in relati on to the ESRB. The cost of the option could 
consequently not be assessed. 
As regards the criterion of coherence, all options, by providing support for the functioning of 
the ESRB, are consistent with the overall objec tives of the EU: to contribute to economic 
growth and job creation, to foster the Single Market and to promote the competitiveness of EU enterprises. The establishment of the ES RB will contribute to safeguarding financial 
stability, to a smooth functioning of the Inte rnal Market and to ensuring a sustainable 
contribution of the financial s ector to the economic growth. 
The following options have been assessed:  1. Provision by the ECB . In terms of effectiveness, giving the European Central Bank 
the role of providing the Secretariat to  the ESRB would mean it was possible to 
leverage the ECB's in-depth macro-prudential expertise and its central role in the EU monetary system. In cooperation with th e National Central Banks, the European 
Central Bank compiles and disseminates a wide range of mone tary statistics and 
indicators regarding MFIs and financ ial institutions outside the MFIs.  
Moreover, the European Central Bank, togeth er with the Eurosystem, systematically 
monitors cyclical and structural developmen ts in the euro-area/EU banking sector and 
45 in other financial sectors to assess the possible vulnerabilities in the financial sector, 
and its resilience to potential shocks. As  regards external relations, the European 
Central Bank maintains working relations with relevant institutions, bodies and for a, both within the EU and internationally in resp ect of tasks entrusted to the Eurosystem.  
A secretariat provided by the European Cent ral Bank could make it possible to benefit 
from the ECB’s resources in terms of expe rtise, infrastructure and networking with 
information sources already ava ilable within th e Institution.  A secret ariat integrated in 
the European Central Bank would also be best placed to align working methods and 
analytical tools and to harmonise da ta originated by different sources. 
As a possible drawback, giving such a prominent role to the European Central Bank 
could potentially create a de ficit of coverage among th e non-euro area financial 
markets. Any structure will n eed to ensure the close invol vement of a broad range of 
EU Central Banks. 
Having regard to the cost-efficiency criterion, the establishmen t of the Secretariat in 
the ECB would allow for maximizing the synerg ies with the existing structures within 
the European Central Bank and the ESRB, rela ting to the financial stability and other 
tasks, including the network of  national central banks and su pervisory authorities. This 
would be particularly true as regards the human resources and the IT infrastructure. 
Therefore, the costs linked to implementa tion of this option would be somewhat 
limited and the Secretariat could be fully opera tional in a relatively short time frame. 
 2. Commission provision . This option could entail positive outcomes in terms of 
effectiveness as a Commission Secretariat would have a wide natural coverage. 
Moreover, the Secretariat could build on th e analysis and infrastructure in place 
(particularly in DG ECFIN) to support Co mmission tasks in respect to the macro-
economic surveillance. 
On the other hand, it can be argued that it would make sense to give central banks a 
leading role in doing the pr eparatory work for the ES RB functioning since the two 
main objectives of central banks relate to the maintenance of monetary and financial 
stability. Identifying vulnerabilities in th e financial and non-fi nancial sectors and 
potential shocks in these markets is therefore a vital part of the wo rk of central banks. 
In this respect, the Commission structur es would lack adequate expertise and 
experience in undertaking the analysis to detect systemic risks stemming from the 
interconnections between the real economy a nd the financial system. Also in terms of 
technical capacity to process and analys e a huge amount of data, particularly on 
financial markets and institutions, the Co mmission would lack adequate resources 
according to its current structure and tasks. A similar reasoning can be applied to the 
need of establishing from scratch effectiv e connections with Central Banks and other 
information sources. This could in  turn result in delays as far as the time needed to set-
up the structure, to adequately staff and e quip it and to be fully operational (and to get 
an adequate level of reputation).  
As regards cost-effectiveness, part of the staff needed could be re-allocated from 
Commission Structures and th e remaining staff (particularly the most technical and 
analytical tasks) could be composed of  Seconded National Expe rts and externally 
recruited staff. As regards the set-up costs, it can be argued that more substantial costs (in comparison to the other options) could be incurred, in particular  as regards the up-
grade of the IT infrastructure. 
46  
3. Virtual Network of Central Banks. This option would probably grant the highest 
degree of coverage and support from all Ce ntral Banks in carryi ng out the collection 
of the data and undertaking th e analytical work. In terms of effectiveness, one should 
also refer to the positive aspects already illu strated under option A related to the wide 
expertise of Central Banks in monitoring vulnerabilities in the financial and non-
financial sectors and safegua rding financial stability. 
Nevertheless, the effectiveness  of such a model would be seriously hampered by the 
complexity of its management and lack  of independence. Indeed, without an 
adequately dimensioned and strong central Secretariat (like in the other options), 
coordination of working methods and analytic al tools and harmonisation of data used 
to feed the analysis may prove difficult. It would also require  extensive work to 
identify role and responsibilities among me mbers and to avoid potential duplications 
of work. This would be partic ularly relevant with regard to the collection of micro-
prudential information and in the liaison with the support structures of other 
international institutional deal ing with financial stability issues (or third countries). 
Any possible disagreements in carrying out the preparatory work  for the ESRB could 
be quite difficult to be quickly sorted out and result in serious obstructions to the 
functioning of the network. 
As regards the cost-efficiency  criterion, the set-up of such framework would imply 
rather limited costs since it would build on existing structures within the European Central Bank and the National Central Banks. 
  
On balance, provision by the European Central Bank emerges clearly as the most beneficial 
option. As regards the effectiveness the European  Central Bank would be best placed, due to 
specific functions fulfilled within the ESCB, to  deal with the broad set of relevant macro-
economic and micro-financial data and indicato rs needed for the preparatory work for the 
ESRB meetings. Moreover, it could fully exploit the well established networking with other 
National Central Banks and EU su pervisors. Also in respect to  the efficiency criterion, the 
European Central Bank option out performs the remaining soluti ons as it would maximize the 
synergies with existing structures in relation to  the pursue of task in the field of monetary 
policy and financial stability. The existing co nnections with National Central Banks and 
Supervisory Authorities would contribute to limit start-up costs and delays in having the 
structure fully operational. 
 
Table 21 
Options Assessment criteria 
  Effectiveness Efficiency Coherence 
1. Baseline Scenario (current 
fragmented arrangements) 0 0  0 
2. European Central Bank +++ +++ +++ 
3. Commission ++ ++ +++ 
4. Virtual network of Central Banks + + +++ 
 
47  
7. Impact of the selected options 
 
7.1. The set of selected options 
 
The tables below relate the selected options to each of the operational objectives of the ESFS 
and the ESRB. 
 
Table 22. Options selected for the Euro pean System of Financial Supervisors  
EUROPEAN SUPERVISORY AUTHORITIES 
POWERS 
Operational objective Selected option 
Define powers to ensure a single set of harmonised 
rules  Issuing (1) non-binding standards and 
recommendations and (2) proposals to the Commission for binding standards [Option 2] 
Define powers to bring about consistent application of 
EU rules Mediation between supervisors regarding consistent 
application of EU rules; binding decision-making in 
case of disagreements between supervisors; warning of manifest breaches of EU law [Option 4] 
Ensure a common supervisory culture and consistent supervisory practices Tasks of the 3L3 Committees plus participation in 
relevant colleges of supervisors, and a facilitation task for colleges in general [Option 2] 
Ensure full supervisory powers Full supervisory powers for entities with a 
Community-wide reach [Option 2] 
Define powers in crisis situations Coordination powers plus binding decision making 
powers in emergency situations [Option 3] 
Grant necessary powers to collect and manage micro-prudential information  Collecting aggregated, anonymised information plus 
ad hoc information gathering powers directly from 
financial undertakings [Option 3]. Receiving all 
information for colleges of supervisors and managing and distributing the information [Option 3]. 
Define safeguards to avoid impact on MS fiscal 
responsibilities Formal safeguard procedure with ultimate Council 
decision [Option 4] 
GOVERNANCE 
Operational objective Selected option 
Define roles, powers and legal status for the Joint 
Committee Steering committee with no legal personality [Option 
2] 
Set up effective voting procedures Mixed QMV and majority voting, depending on 
subject matter [Option 3] 
Define effective channels of contact  with stakeholders Separate stake holder groups for each ESA [Option 2] 
FUNDING 
Operational objective Selected option 
Design optimal funding struct ure as to the sources of 
funding  Mixed financing by MS (60%) and Community budget 
(40%) [option 2 b] 
 
48 Table 23. Options selected for the European Systemic Risk Board  
EUROPEAN SYSTEMIC RISK BOARD 
POWERS 
Operational objective Selected option 
Define effective powers of follow-up to warnings “Comply or explain” mechanism [option 2] 
Define effective scope of warnings General/unlimited scope [option 1] 
Define adequate access to inform ation Collection of aggregated  data on a regular basis + 
access to necessary inform ation on individual 
institutions upon request [option 3] 
Ensure optimal degree of publicity of warnings Board to decide on a case-by-case basis [option 5] 
GOVERNANCE 
Operational objective Selected option 
Define the size of the Board and the scope of expertise Central Banks + Supervisors + EFC + ESAs [option 4 
] 
Define addressees that en sure the effectiveness of 
warnings MS, ESAs, national supervisors, and Commission 
[option 6] 
Ensure an effective involvement of stakeholders Stakeholder Group and a A dvisory Technical Group 
[options 3 and 5] 
FUNDING 
Operational objective Selected option 
Define the optimal set-up  for the Secretariat of ESRB European Central Bank to provide secretariat [option 
2] 
 
 
7.2. Impact on stakeholders 
 
The first Impact Assessment analysed the impact s of the creation of the European System of 
Financial Supervisors and the European Syst emic Risk Council on various stakeholder 
groups. These general, largely beneficial imp acts were presented in the table which is 
included in annex 2 to this report.  In the present Impact Assessment we can consid er more specific impacts on various entities 
more directly concerned by the establishment of the ESRB and ESFS. These impacts are linked with the specific powers and the gove rnance structures of the new European 
Supervisory Authorities and the European Syst emic Risk Board. The concerned institutions 
include the national supervisors, the national finance ministries, the existing Level 3 and 
Level 2 committees, the European Central Ba nk and the national central banks. Although the 
impact on financial companies identified in th e first IA remains valid, we can now also 
distinguish specific impacts on financial conglome rates and credit rating agencies. Finally, the 
new system for financial supervision will also involve other stakeholders, such as consumers and employees of companies in the financial services sector. 
 
National supervisors 
 
The European System of Financial Supervis ors has been designed to ensure effective 
harmonisation of financial supervision in the EU. This will be accomplished through the new 
49 Authorities' powers to propose binding standa rds and adopt binding decisions in case of 
disagreements between supervisors on application of EU rules. In addi tion, application of EU 
rules by national supervisors will be monitore d on a constant basis. In case of manifest 
breaches of the Community law, the European Supervisory Authorities will issue relevant 
warnings. The ESAs activities will contribute to  achieving supervisor y level playing field 
across the Single Market.  The European Supervisory Author ities will also facilitate functioning of the colleges of 
supervisors, which will continue to play a pi votal role in supervis ion of large European 
financial groups. The ESAs’ representatives will ha ve the right to partic ipate in the meetings 
of such colleges, with the power to mediate and settle disputes wi th a binding effect. The 
ESAs will also run central databases for ba nking, insurance and securities sectors, the 
development of which will be a paramount undertaking. The members of the colleges will benefit from access to the supervisory data and  information aggregated in these databases. 
The information may also be made availabl e to the European Systemic Risk Board. 
 To support cross-border cooperation and strengt hen the European pers pective on supervisory 
challenges the European Supervisory Authorit ies will organise trainings for national 
supervisors as well as staff exchanges and seco ndments. This will co ntribute to enhancing 
supervisory skills and development of ne w competences of national supervisors. 
 An important element of the ESFS will be a possib ility for national supervisors (as well as for 
supervised companies) to bring appeals agains t decisions taken by the European Supervisory 
Authorities. For each Authority an independ ent Board of Appeals will be established, 
composed of six individuals with expertise in the concerned sector. 
 Most national supervisors will have to contribute their share to finance the European Supervisory Authorities, according to  the agreed funding arrangements. 
 The creation of the ESRB should help national supervisors to better understand the impact of 
their actions on the wider economic and financial sy stem.  It should also help to draw together 
an understanding of risks build ing across the whole of Eur ope and a more coordinated 
consideration of how to mitigate those risks.   National supervisors might have a greater 
burden in terms of information provision and a re quirement to 'act or explain' following the 
receipt of a recommendation, however, this will be minimised as much as possible by 
channelling information requests and recomm endations through the European Supervisory 
Authorities where this is  possible and appropriate. 
 
National Finance Ministries 
 
 The ministers of finance in the Member Stat es will benefit from the positive impacts of 
enhanced financial stability across the EU: be tter business environment, enhanced consumer 
confidence and more investment attracted from 3
rd countries – all c ontributing to higher 
economic growth. The Ministries will have access to  the analyses of systemic risks carried out 
by the European Systemic Risk Board and wi ll receive warnings and recommendations if 
necessary. This will allow the governments to dr ive their economies towards a more secure 
macro-economic environment.  
50 As experienced in the recent financial crisis, solv ency problems of financial institutions often 
entail government interventions and bail outs. The European Sy stem of Financial Supervisors 
will include safeguards that any decisions ta ken by the European Supervisory Authority 
cannot impinge on the fiscal responsibility of any given Member State. National authorities 
will have the right to refuse to follow decisions taken by European Supervisory Authorities in justified cases.  While it is true that dependi ng on the Member State, the Treas uries may have to contribute 
their share to finance the European Supervisor y Authorities, according to the agreed funding 
arrangements, on the other hand  the improved level of financ ial supervision may well save 
taxpayers' money in the Member States by leadi ng to action which prevents the necessity of 
bank bail-outs..   
Level 3 and Level 2 Committees 
 
With establishment of the European Supervis ory Authorities, the Level 3 committees: CEBS, 
CEIOPS and CESR, will cease to exist and thei r functions will be fully taken over by the 
ESFS. However, the new Authoriti es will as much as possible ensure continuity with the 
Level 3 committees work and will draw on their experience. As for the location of the new 
Authorities, it is proposed to maintain the pres ent place of residence of the existing European 
committees of supervisors (i.e. Frankfurt, London and Paris), as this allows for a fast and 
effective transition to the new regime. For the transformation of the existing committees into effective Authorities enhan ced resources are needed- both personnel and budgetary. The 
status of the staff will change once the Authori ties adopt the Staff Regul ation of the European 
institutions. The Authorities will have to adju st their budgetary proced ures to the Financial 
Regulation of the Communities. They will, fo r example, no longer be allowed to receive 
grants from the Commission – this will be re placed by direct subsidies from the Community 
budget.   The Level 2 committees: the EBC, EIOPC and ES C will continue their work in the current 
format, serving as the Commission's comitol ogy committees adopting implementing measures 
to the Community legal acts (i.e. Level 1 Di rectives and Regulations adopted in the co-
decision).  
European Central Bank 
 
The European Central Bank will be involved in  the new system of supervision both through 
the participation to the ESRB and through the pr ovision of the Secretariat to the Board. Both 
activities will imply a limited additional burden since the European Central Bank can largely 
exploit synergies from the resources deployed to  pursue its monetary a nd financial stability 
tasks. Moreover, the European Central Bank will benefit from the well established network with other EU Central Banks - including non-Euro  Area Central Banks - and Supervisors. The 
ESRB related activities will enable the European  Central Bank to progressively reinforce such 
links with positive effects also for the other tasks included in the European Central Bank mandate   
National Central Banks 
 
The participation in the ESRB and the input to the work of the S ecretariat will not involve any 
significant additional costs for national central ba nks since they will be able to largely build 
51 on existing organisational and infr astructural resources dedicated to their traditional role. On 
the other hand, as regards the positive impact, th ey will benefit from an enhanced cooperation 
and harmonisation of methodologies a nd working methods among themselves. 
 
Financial institutions 
 
As indicated in the first Impact Assessment, the reform of the system of  financial supervision 
in Europe will bring many benefits for financ ial companies. For large financial groups, the 
improved cross-border and cross-sector supervision will reduce compliance costs thanks to harmonised standards and supervisory practices a nd will also potentially prevent failures and 
bankruptcies. The work of the ESRB will cont ribute to the improved business environment 
thanks to enhanced financial stability and more  effective crisis prevention in the EU, which 
will benefit all companies in the Internal Market.   On the other hand, companies may be subject to additional reporting requirements, linked 
with the ESFS task of collecting and mana ging information for supervisory purposes, 
especially in case of direct request for access to information from an  ESA to a company. 
Besides, some administrative burden may be caused to companies by possible adaptations of 
national reporting systems. As regards ESRB collection of information, as the ESRB would 
have access through the ESAs to existing repor ting schemes, there should be no impact in 
terms of additional reporting burdens for financial institutions.  Taking account of the powers to  be granted to the ESFS, two more specific impacts can be 
singled out. First, the credit rating agencies registered in  the EU will undergo direct 
supervision by the Europ ean Securities Markets Authority. This will include full supervisory 
oversight, conducting on-site inspections  and other relevant activities.  
 Secondly, the establishment of the Joint Committee for three European Supervisory Authorities will be a basis for further strengthening of oversight of financial conglomerates at the European level. In the ESFS, each Authority will have to devote a due part of its resources 
for ensuring effective cross-sector co operation on an on-going basis.   
 
Other stakeholders 
 
The new system for financial supervision will bring general benefits  to various stakeholder 
groups in Europe, in particular the users of  financial services. A better organised and 
functioning supervision will help the EU financia l sector regain its classical role in the 
economy: to channel savings into most pr oductive investments, and thus support the 
economic growth. More specifically, the benefits will above all be linked with the   increased 
confidence of consumers, investors and entrepre neurs resulting from the enhanced financial 
stability in the Internal Market. The new supervisory system will also provide better protection to users of financia l services, including through great er convergence of conduct-of-
business supervision. It will also  facilitate access to finance by strengthening the resilience 
and preventing failure of individual financial in stitutions. Last but not least, it will prevent job 
losses and support job creation: in  the EU financial services s ector as well as other sectors 
through the spill- over effects. 
 To ensure appropriate input of  various stakeholders into th e decision making process of the 
new Authorities, a dedicated stakeholder group will be created for each authority. Each group 
will count thirty members representing in bala nced proportions the consumers and users, the 
52 industry and its employees. The groups will hold  regular quarterly meetings. The European 
Supervisory Authorities may also consult them on an ad-hoc basis on any relevant matter. 
These bodies will provide the stakeholders, in pa rticular the representa tives of the consumer 
associations and the trade unions, with a struct ured way to provide th eir opinions on various 
aspects of financial supervision in Europe. The ESRB will have the ability to consult stakeholders and utilise independent expe rts and academics where it is appropriate. 
  
7.3. Cost of the selected options. 
 
7.3.1. ESFS 
 
The cost of setting up the three new European Supervisory Authorities has been estimated according to three cost categories: the staff costs, the infrastructure costs and the operations costs. This division corresponds to the genera l cost classification used in accounts of the 
existing EU regulatory agencies. The total co sts of creating the European Supervisory 
Authorities has been estimated at about 37 million Euro in the first full year of operations 
(2011), reaching over 68 million Euro after three years (2014) – see Table 24 below. 
 
 
Table 24. Estimated budget of three ESAs in 2011-2014 
In thousands € 
 2011 2012 2013 2014 
Title 1 - Staff costs 18.843 28.096 34.808 40.280
Management 2.553 4.173 4.423 4.673
Senior / expert staff:  0
Temporary agents 7.436 10.894 14.165 16.488
Seconded national experts 3.880 5.560 7.180 8.260
Administrative and ot her support staff:  0
Temporary agents 1.696 2.570 3.064 3.865
Contract agents 286 487 546 722
Staff benefits 2.378 3.553 4.407 5.101
Staff training: general 74 110 137 161
Staff training: enhancing supervisory skills 414 603 779 914
Expenditure relating to staff recruitment 127 146 108 96
Title 2 - Building, equipment and 
administrative expenditure 5.923 9.176 10.902 12.649
Rental of buildings and associated costs 3.014 4.824 5.494 6.287
Information and communication technology 759 1.136 1.414 1.661
Movable property and associated costs 325 495 599 721
Current administrative expenditure 275 417 508 609
Postage / Telecommunications 226 329 407 483
Meeting expenses 1.324 1.975 2.480 2.889
Title 3 – Operations 12.496 13.996 14.929 15.496
Powers      
Financial Services Stakeholder Group 648 648 648 648
Participation in colleges of supervisors 104 104 104 104
53 Common training for supervisors and staff 
exchanges & secondments 1.500 3.000 3.933 4.500
Collection of information: developing and managing the central European databases 9.000 9.000 9.000 9.000
International relations 150 150 150 150
Contacts with supervisory authorities from 
3rd countries 180 180 180 180
Supervision on entities with a Community-
wide reach: on site inspections 300 300 300 300
Governance      
Board of Supervisors 250 250 250 250
Management Board 77 77 77 77
Joint Committee 29 29 29 29
Board of Appeal 259 259 259 259
TOTAL 37.263 51.268 60.639 68.426
Source: Commission and L3 Committees estimates and calculations 
 
The staff cost estimates are based on the assumption that each European Supervisory Authority will aim to double its staff as compared to the staff numbers in the existing Level 3 Committees in the first year of its operation. Th is means an average increase from 20 to 40 in 
each of the three Authorities. It has been also assumed that the number of staff would increase 
relatively fast in the start-up phase. Each au thority would hire on av erage 15 new employees 
per year. Afterwards, the Authorities would r each the "cruising speed" with about 80 – 100 
staff each.   The need for increased staffing numbers reflec ts the significant number of new tasks which 
the Authorities will need to undertake in additi on to their previous responsibilities. They 
include, but are not limited to, de veloping new technical standard s in a number of areas of 
financial services legislation, ensuring consistent application of Community rules, settling 
disagreements between national co mpetent authorities, attending colleges of supervisors and 
facilitating peer reviews. Each of these activities will require significant new resources. The detailed breakdown of estimated staff numbers by various categories is presented in Table 25 
below. 
 
Table 25. Estimated staff of ESAs 
 For three ESAs 
 2011 2012 2013 2014 
Total staff 123 184 229 269 
Management 11 19 20 21 
Senior / expert staff:     
Temporary agents 60 88 114 134 
Seconded national experts 32 46 59 69 
Administrative an d other support 
staff:     
Temporary agents 14 21 25 31 
Contract agents 6 10 11 14 
Source: Commission estimates 
 
54 Another assumption adopted for estimation of the st aff costs is that the Staff Regulation of EU 
institutions would be applied in all the Au thorities. This is reflected – with some 
modifications – in per head rates used under T itle 1 (see Annex 1 for details). The impact of 
the locations of the L3 Committees has also  been taken into acc ount (through the cost-of-
living multipliers).  The figures under Title 2 relating to the cost of infrastructure  have been based on the input 
from the existing Level 3 Committees. The CEBS, CEIOPS and CESR provided estimates of their respective costs in this category, based on extrapolation of their real costs linked with 
running offices and administration in their cu rrent locations. Given that London, Frankfurt 
and Paris are financial centres and are among most expensive busin ess locations in the world, 
the estimated costs naturally exceed the average levels for the EU regulatory agencies.  The operation costs are specific  to the competencies and the governance model of the 
European Supervisory Authorities. Regarding po wers, various types of activities foreseen for 
the ESFS have been considered in terms of generating operational costs apart from the general staff costs. It has been possible to attribute such costs to a nu mber of activities, e.g. running 
the stakeholder groups, developing the European supervisory databases, participating in the 
colleges of supervisors, organising training for supervisors from the Member States or 
carrying out on-site inspections of directly supervised co mpanies. The specific costs for these 
operations are very often linked with missions a nd meetings, but can also include substantial 
expense on outsourced services, e.g. to crea te a database or or ganise trainings.  
 On the other hand, it has been  judged that many of the ESFS activities are not linked with 
extra operational costs and are fully reflected in  the general staff costs. These are for example 
the development of technical standards, guid elines and recommendations , ensuring consistent 
application of the Community law or th e coordination in crisis situations. 
 Regarding the governance, the operational costs will stem from activities of various bodies 
foreseen to ensure proper f unctioning of the European System  of Financial Supervisors in 
general and the Authorities in particular: the Board of Supervisors, the Management Board, 
the Joint Committee and the Board of Appeals.   The methods of calculating the co sts are presented more  in detail in tabl es for EBA, EIOPA 
and ESMA in Annex 1.  
7.3.2. ESRB 
 
As indicated above in section 6.2.3., regarding the cost s of the ESRB, it has been not possible 
at this stage to obtain sufficient information to  evaluate the staffing ne eds and costs, and other 
costs of the ESRB, such as IT equipment and travel expenses, because the ECB does not envisage setting up a dedicated structure but w ould rather leverage the staff, resources and 
expertise of various departments in the ECB, de pending on the issues to  be analysed. It was 
therefore not possible to determine upfront e.g. the number of full-time equivalent staff which 
would work in relation to the ESRB. The co st of the option could consequently not be 
assessed. 
 
55 8. Monitoring and evaluation 
The Regulations establishing the ESFS and th e ESRB provide for evaluation of the new 
system for European financial supervision three y ears from the effective start of its operation. 
The Commission will prepare two reports on the experience with functio ning of the ESFS and 
ESRB respectively. The evaluation will also include  extensive consultation, in particular of 
the Financial Services Stakehol der Group in case of the ESFS and the European Central Bank 
for the ESRB. 
As stated in the first Impact Assessment report, specific indicators should be identified and 
matched with the ESFS and ESRB specific objectiv es and – where possible – also with the 
specific powers or elements of the governance st ructure. These indicators will serve to assess 
the performance of the new Authorities and th e new Board in fulfilling their tasks. The 
following table presents the specific objectives of the European Supervisory Authorities and 
matches them with some possible indicators: 
Objective Proposed indicator 
The development of technical 
standards to build a single rulebook in the EU 
 • Number of adopted technical standards relative to those required to be 
developed 
• Number of standards proposed by EBA / EIOPA / ESMA and rejected by 
the Commission 
• Number of adopted non-binding recommendations 
Ensure consistent application 
of EU rules • Number of successful mediations without binding settlement 
• Number of warnings on manifest breach of the Community law 
Ensure a common 
supervisory culture: participation in colleges of 
supervisors 
 • Number of colleges with EBA / EIOPA participation 
• Average number of meetings per college attended by EBA / EIOPA 
representatives 
Ensure a common supervisory culture: other 
activities • Number of hours training for supervisors 
• Number of staff participating in exchanges / secondments 
• Number of peer reviews conducted 
• Number of obstacles to convergence identified and removed 
• New practical tools and instruments to promote convergence 
Carry out direct supervision 
of pan-European financial institutions  
 • Number of on-site inspections by ESMA 
• Number of complaints / appeals from supervised companies 
Ensure coordinated decision 
making in emergencies • Effectiveness of mediation, decisions and coordination in crisis situations 
Ensure a common 
supervisory culture: Collect 
and manage micro-prudential information • Progress in development of the central databases: completeness and 
timeliness of information 
 
The final set of indicators will be decided by the Commission at the time of conducting the 
required evaluations. Not less important in the final assessment will be the qualitative evidence gathered in the consultations. 
The evaluations will be repeated every three years. 
 
1 ANNEX 1  
 
ESFS costing tables  
 
Table 1. Estimated budget of EBA in th e first year of operation (2011) 
In thousands € 
Title 1 - Staff costs    6 694
Total staff: 40 Average annual cost per head 
(based on DG BUDG 
guidelines and 3L3 advice) 
Multiplier cost-of-living London 1,4 
Management 2 233,8 468
Senior / expert staff:     
Temporary agents 17 140,0 2 380
Seconded national experts 
17 140,0 2 380
Administrative  and other 
support staff:     
Temporary agents 
2 140,0 280
Contract agents 
2 58,8 118
Staff benefits 15% of total staff costs   844
Staff training: general Average amount per 
person (COM data) 0,6 24
Staff training: enhancing 
supervisory skills Advice from 3L3 4,5 153
Expenditure relating to 
staff recruitment 3 candidates interviewed 
per post on average 0,8 48
Title 2 - Building, 
equipment and 
administrative 
expenditure     2 226
Rental of buildings and associated costs CEBS data and estimates  
1 326
Information and 
communication technology CEBS data and estimates  
245
Movable property and 
associated costs CEBS data and estimates  
54
Current administrative 
expenditure CEBS data and estimates  
53
Postage / 
Telecommunications CEBS data and estimates  
19
Travel and meeting 
expenses CEBS data and estimates  
529
2 Title 3 - Operations   -  4 095
Powers  Costed activity  Assumptions  Total cost 
Consultations Financial Services 
Stakeholder Group One FFSG per each ESA. 30 
members meeting 4 times a 
year. Annual remuneration 
6000€ per person. Industry representatives to be 
reimbursed for travel but not 
remunerated. 216
Common supervisory culture Participation in colleges of 
supervisors Approximately 40 colleges in 
the sector. Participating in 1 
two day meeting per year, 
one EBA rep. per meeting on average. 64 
Common supervisory 
culture  Common training for 
supervisors and staff 
exchanges & secondments  Based on the amount 
foreseen for action grants to 
the L3C for 2010-2015  500 
Collection of information Developing and managing 
the central European database  CEBS estimate 
3 000 
International relations Contacts with third country 
authorities and other 
international bodies e.g. for equivalence advice 11 missions outside EU per 
year for 2 persons.  
110 
Supervision of entities 
with a Community-wide reach On site inspections  
 0
Governance  Costed activity  Assumptions  Total cost 
Board of Supervisors Decision making  26 members to be 
reimbursed - 4 meetings per 
year.  83 
Management Board Management  6 members including 4 
representatives of national 
supervisors. Meeting every 
month, when possible back to back with meetings of Board 
of Supervisors.  
26 
 Joint Committee Cross-sector co operation Period meetings for 
chairperson from each ESA  10 
Board of Appeal Appeals  6 members, assuming 8 
meetings per year, and 
annual remuneration 8000€ per person  86 
TOTAL     13 015
 
Source: Commission and the L3 Committees estimates and calculations 
 
3 Table 2. Estimated budget of EIOPA in the first year of operation (2011) 
In thousands € 
Title 1 - Staff costs    4 694
Total staff: 40 Average annual cost per head 
(based on DG BUDG 
guidelines and 3L3 advice) 
Multiplier cost-of-living Frankfurt 1,00 
Management 2 167,0 334
Senior / expert staff:     
Temporary agents 15 100,0 1 500
Seconded national experts 
15 100,0 1 500
Administrative  and other 
support staff:     
Temporary agents 
4 100,0 400
Contract agents 
4 42,0 168
Staff benefits 15% of total staff costs   620
Staff training: general Average amount per 
person (COM data) 0,6 24
Staff training: enhancing 
supervisory skills Advice from 3L3 4,5 135
Expenditure relating to 
staff recruitment 3 candidates interviewed 
per post on average 0,8 48
Title 2 - Building, 
equipment and 
administrative 
expenditure     1 822
Rental of buildings and 
associated costs CEIOPS data and estimates  
828
Information and 
communication 
technology CEIOPS data and estimates  
250
Movable property and 
associated costs CEIOPS data and estimates  
213
Current administrative 
expenditure CEIOPS data and estimates  
166
Postage / 
Telecommunications CEIOPS data and estimates  
70
Travel and meeting 
expenses CEIOPS data and estimates  
293
Title 3 - Operations   -  4 071
Powers  Costed activity  Assumptions  Total cost  
Consultations Financial Services 
Stakeholder Group One FFSG per each ESA. 30 
members meeting 4 times a year. Annual remuneration 
6000€ per person. Industry 
representatives to be reimbursed for travel but not 
remunerated. 216
4 Common supervisory 
culture Participation in colleges of 
supervisors Approximately 25 colleges in 
the sector. Participating in 1 
two day meeting per year, one EIOPA rep. per meeting 
on average. 40
Common supervisory culture  Common training for 
supervisors and staff 
exchanges & secondments  Based on the amount 
foreseen for action grants to 
the L3C for 2010-2015  500
Collection of information Developing and managing 
the central European 
database  CEBS estimate 
3 000
International relations Contacts with third country 
authorities and other international bodies e.g. for 
equivalence advice 11 missions outside EU per 
year for 2 persons. 
110
Supervision of entities 
with a Community-wide reach On site inspections  
 0
Governance  Costed activity  Assumptions  Total cost 
Board of Supervisors Decision making  26 members to be 
reimbursed - 4 meetings per 
year.  83
Management Board Management  6 members including 4 
representatives of national supervisors. Meeting every 
month, when possible back to 
back with meetings of Board 
of Supervisors.  
26
 Joint Committee Cross-sector coop eration Periodic meetings for 
chairperson from each ESA  10
Board of Appeal Appeals  6 members, assuming 8 
meetings per year, and 
annual remuneration 8000€ 
per person  86
TOTAL     10 587
 
 
Source: Commission and the L3 Committees estimates and calculations 
 
5 Table 3. Estimated budget of ESMA in the first year of operation (2011) 
In thousands € 
Title 1 - Staff costs    7 455
Total staff: 43 Average annual cost per head 
(based on DG BUDG 
guidelines and 3L3 advice) 
Multiplier cost-of-living Paris 1,27 
Management 7 250,2 1 751 
Senior / expert staff:     
Temporary agents 28 127,0 3 556 
Seconded national experts 
 127,0 - 
Administrative  and other 
support staff:      
Temporary agents 
8 127,0 1 016 
Contract agents 
 53,3 - 
Staff benefits 15% of total staff costs   948 
Staff training: general Average amount per 
person (COM data) 0,6 26 
Staff training: enhancing 
supervisory skills Advice from 3L3 4,5 126
Expenditure relating to 
staff recruitment 3 candidates interviewed 
per post on average 0,8 31 
Title 2 - Building, 
equipment and 
administrative 
expenditure     1 876 
Rental of buildings and 
associated costs CESR data and estimates  
860 
Information and 
communication 
technology CESR data and estimates  
264 
Movable property and 
associated costs CESR data and estimates  
58 
Current administrative 
expenditure CESR data and estimates  
57 
Postage / 
Telecommunications CESR data and estimates  
136 
Travel and meeting 
expenses CESR data and estimates  
502 
Title 3 - Operations   -  4 331
Powers  Costed activity  Assumptions  Total cost 
Consultations Financial Services 
Stakeholder Group One FFSG per each ESA. 30 
members meeting 4 times a year. Annual remuneration 
6000€ per person. Industry 
representatives to be reimbursed for travel but not 
remunerated. 216
6 Common supervisory 
culture Participation in colleges of 
supervisors  
0
Common supervisory 
culture  Common training for 
supervisors and staff 
exchanges & secondments  Based on the amount 
foreseen for action grants to 
the L3C for 2010-2015  500
Collection of information Developing and managing 
the central European 
database  CEBS estimate 
3 000
International relations Contacts with third country 
authorities and other 
international bodies e.g. for equivalence advice 11 missions outside EU per 
year for 2 persons.  
110 
Supervision of entities 
with a Community-wide 
reach On site inspections CESR estimates 
300
Governance  Costed activity  Assumptions  Total cost 
Board of Supervisors Decision making  26 members to be 
reimbursed - 4 meetings per year.  83
Management Board Management  6 members including 4 
representatives of national 
supervisors. Meeting every month, when possible back to 
back with meetings of Board 
of Supervisors.  
26
 Joint Steering Committee Cross-sector cooperation  Periodic meetings for 
chairperson from each ESA 10
Board of Appeal Appeals  6 members, assuming 8 
meetings per year, and annual remuneration 8000€ 
per person  86
TOTAL     13 662
 
Source: Commission and the L3 Committees estimates and calculations 
 
7 ANNEX 2  
 
Impact of the ESFS and ESRB on stakeholders  
 
 Micro-prudential supervision 
ESFS (3 Authorities) Macro-prudential supervision 
ESRB 
Financial industry: cross-border + 
Prevent failure of financial 
institutions through better co-
ordinated supervision. Ensure level 
playing field and reduce 
compliance costs thanks to 
harmonised standards and 
supervisory practices. Improve 
business environment thanks to 
financial stability and more 
effective crisis prevention in the 
EU. 
–  
Possible increase of administrative 
burden linked with reporting 
directly to ESAs or adapting to 
ESAs' format. + 
Prevention of failure of financial 
institutions through systemic 
contagion from other financial 
institutions in difficulty. Improved 
business environment due to 
financial stability and crisis 
prevention in the EU 
Financial industry: local + 
Improved business environment 
due to more effective financial 
stability and crisis prevention in the 
EU 
– 
Possible increase of administrative 
burden linked with reporting 
directly to ESAs or adapting to 
ESAs' format + 
Prevention of failure of financial 
institutions through systemic 
contagion from other financial 
institutions in difficulty. Improved 
business environment due to 
financial stability and crisis 
prevention in the EU 
Financial industry: 3rd countries + 
Attracting investments to Internal 
Market thanks to harmonised 
business environment and high 
quality supervision 
– 
Need to adapt to additional EU 
standards  + 
Attracting investments to Internal 
Market thanks to increased 
financial stability 
Consumers and users of financial services (including retail 
investors) + 
Lower risk of failure of a financial 
institution.  Greater convergence of 
conduct-of-business supervision in 
Europe thought adoption of 
common supervisory practices 
– + 
Increase confidence by 
strengthening financial stability 
8 Cost of creating the ESFS higher 
than that of previous L3 
Committees 
Employees + 
Preventing job losses in individual 
financial institutions by better 
detecting and remedying 
prudential-related difficulties 
– 
Cost of creating the ESFS higher 
than that of previous L3 
Committees  + 
Preventing job losses in the 
economy as a whole arising from 
spill-over of financial sector 
difficulties to the real economy 
Pensioners + 
Providing incentives for 
development of cross-border 
occupational pension funds and 
strengthening their oversight. 
Improve stability of pension funds 
– 
Cost of creating the ESFS higher 
than that of previous L3 
Committees  + 
Strengthened confidence of 
pensioners by strengthening 
financial stability. Improve 
stability of pension funds. 
Corporations from non-financial sector and SMEs + 
Facilitating access to finance by 
better preventing failure of 
individual institutions (e.g. 
European Authorities in oversight 
of credit ratings, approval of 
prospectuses) 
– 
Cost of creating the ESFS higher 
than that of previous L3 
Committees  + 
Preventing major financial crises 
with damaging impacts on 
corporate equity value. Preventing 
major economic recessions linked 
with reduction of trade and 
demand.  
Supervisors + 
Ensuring more effective 
cooperation by clarifying the roles 
and responsibilities of supervisors 
at the national and Community 
level and establishing an effective 
framework for conflict resolution 
between supervisors. Indirect 
strengthening of supervisory 
independence and European 
programmes to enhance skills of 
supervisors 
– 
Need to invest financial and human 
resources in the new Authorities.  
Higher costs arising from increased 
participation and coordination 
requirements + 
Creating a framework linking 
micro-prudential supervision with 
macro-prudential supervision. 
Facilitating exchange of 
information and leading to 
creation of a common information 
pool. 
9  
National governments + 
Establishing EU supervisory 
arrangements that are more 
consistent with European financial 
integration. Less risks of having to 
inject public money in the financial 
system. 
– 
Risk of needing to use the 
safeguards 
 + 
Providing governments with 
recommendations for actions 
needed to protect macro-economic 
stability in the EU and individual 
Member States 
– 
Risk of reputation damage in case 
of leak of ESRB warnings 
Central banks + 
Establishing EU supervisory 
arrangements that are more 
consistent with European financial 
integration. + 
Giving effectiveness to the 
analysis of macro prudential 
developments carried out in the 
central banks. Facilitating 
exchange of information and 
leading to creation of a common 
information pool. 
– 
Need to invest human and 
financial resources in the ESRB 
work 
 
Source: European Commission. Impact Assessment for the Communication 'European financial supervision' of 
27 May 2009 with modifications 
 
1 ANNEX 3  
 
Preliminary outline of possible sectoral le gislation granting European Supervisory Au thorities scope to de velop draft technical  
standards  
 
FINANCIAL CONGLOMERATES DIRECTIVE 
2002/87/EC 
Area Description Rationale 
Durable link 
criterion for 
identification - 
Article 2(11) The detection of relationships of the conglomerate with entities that may pose 
additional risks to the group, also otherwise than through a control- or 
ownership-relationship Currently no level playing field, nor legal certainty, in application 
of durable link criterion to detect participations 
Relevant competent 
authorities, i.e. 
membership of the core college - 
Article 2(17) The criteria for the determination of th e "relevant competen t authority", as 
different from the other "competent authorities" (all those who authorised one 
or more legal entities of the group) Determination of which supervisor may be invited to the core 
college is not clear, important for consistent approach across 
colleges 
Identification of a conglomerate by means of other 
criteria than balance 
sheet and solvency figures - Article 3(5) The basic identification method builds on two relative indicators and one 
absolute indicator: balance sheet ratio s, solvency ratios, and balance sheet 
total. To enable the identification of other, less straightforward, complex and 
cross sectoral groups as financial conglo merates, also criteria such as income 
structure and off balance sheet activities may be used, but the legal provision does not prescribe how these alternative criteria should be applied Use of other criteria than balance sheet total and solvency figures 
for the identification of conglomera tes neither clear nor predictable 
Method of 
calculation of capital 
at conglomerate level - Article 6(2) There are two basic methods eligible for aggregating the capital figures of all 
the legal entities in a group and calculating available group capital, known as 
the consolidation method and the deduction-and-aggregation method, consistent with CRD and Solvency II. However, the inputs into these methods 
are not prescribed, leaving sc ope for significant variation Although the directive restricts the methods which can be used for 
the calculation of capital, many degrees of freedom remain, 
potentially causing unjustified different outcomes for similar conglomerates 
Supervision of risk concentrations - Article 7 The aspects which need to be checked by supervisors in order to detect 
whether the same risk adds up th roughout the financial conglomerate The directive allows for many approaches and potentially overlaps 
of supervision on risk concentrations within sector-silos. It is important to align application acr oss directives applicable to 
conglomerates 
Supervision of Intra 
group transactions - 
Article 8 The aspects which need to be checked by supervisors in order to detect 
whether risks in one part of the conglomerate may spread to or affect other 
parts of the conglomerate The directive allows for many approaches and potentially overlaps 
supervision on intra group transactions. It is important to align 
application across directives applicable to conglomerates 
Supervision on 
internal control Supervision on internal control mechanisms, such as risk management and 
internal governance.  Closely related to  elements in the supervisory review As far as relevant for the cross s ectoral elements of conglomerates' 
risk management and internal control, need for alignment of 
2 mechanisms - 
Article 9 process, required by both the CRD an d Solvency II. application across dir ectives applicable to conglomerates 
Appointment of 
coordinating 
supervisor - Article 
10 The coordinator is determined following several criteria but the directive 
provides flexibility in case the involved supervisors would favour a certain 
choice. Article 10 should be read combined with articles 11, 12 and 15 To limit the scope for disagreement over who should be the 
coordinator of the supplementary supervision 
Tasks of coordinating 
supervisor - Article 
11 The coordinator's tasks are clearly liste d but the directive does not prescribe 
how these tasks should be carried out. Article 11 should be read combined 
with articles 10, 12 and 15 Variation of practices and lack of clarity with respect to the 
application of the tasks listed can create uncertainty 
Information exchange 
requirements - 
Article 12 Supervisors on the same conglomerate ar e obliged to share information based 
on a prescribed list of items. Article 12 should be read combined with articles 
10, 11 and 15 Variation of practices and lack of clarity with respect to the 
application of the information exchange requirements, including 
for emergency situations 
Delegation of tasks - 
Article 15 
 Supervisors on the same conglomerate can  decide to delegate verification 
tasks to each other. Article 15 should be read combined w ith articles 10, 11 
and 12 Variation of practices and lack of clarity with respect to the 
application of this provision 
3 CAPITAL REQUIREMENTS DIRECTIVE  
2006/48/EC and 2006/49/EC10 
Area Description Rationale  
Pillar 2 – interest 
rate risk - Article 
150(2)(a) Specification of the size of sudden and unexpected changes in the interest 
rates referred to in Article 124(5) Technical issue to strength en supervisory convergence 
Temporary changes  
to requirements - Article 150(2)(b) Temporary modification of the minimum level of own funds and/or the risk 
weights in order to take account of speci fic circumstances in view of ensuring 
financial stability.  This will also extend to temporary modification of the 
disclosure framework (Pillar 3) Flexibility required.  Technical standards would provide some 
flexibility to respond to financial stability developments 
Supervisory disclosure - Article 
150(2)(d) and (e) 
and Article 144 Framework for supervisory disclosure Technical issu e to strengthen supervisory convergence.  CEBS 
guidelines already exist in this area 
Authorisation - Article 6 Specification of requirements for a credit institution to be authorised in a 
Member State Technical issue to strength en supervisory convergence 
Prudential 
assessment of 
acquisitions - Article 19-21 Specifications of procedure, assessmen t criteria and information exchange 
when making a prudential assessment of an acquisition Technical/practical issue, to stre ngthen supervisory convergence.  
CEBS guidelines currently exist in this area 
Exercise of the passport - Articles 
25, 26, 28 Relates to the transmission of information between home and host authorities 
for the purpose of implementing the provisions relating to freedom to provide 
services/of establishment.  Practical issue.  Supervisors best  placed to deal with cooperation 
procedures.  CEBS guidelines are being developed in this area 
Information sharing 
- Article 42 List of information to be shared in the context of home/host cooperation 
 Technical/practical issue, to st rengthen supervisory convergence 
Hybrid instruments - 
Article 63a(6) CEBS are required to produce guidelines on Tier 1 hybrid instruments under 
the amended CRD due to come into force in 2011 Technical issue, to streng then supervisory convergence 
Reporting – 
solvency and large 
exposures - Article 
74 and 110(2) CEBS are required to develop a uniform reporting (format, frequency and 
dates) to be applied by 2012 for credit institutions and investment firms' 
minimum capital requiremen ts and large exposures Technical issue, to streng then supervisory convergence 
 
Rating agencies (ECAI) – 
recognition - Article 
81(2) and 97 Standards regarding the recognition of ECAI's in relation to the credit rating 
agencies regulation Technical issue, to strengthen  supervisory convergence, avoid 
duplication of work and reduce the burden of the recognition 
process where an ECAI is regist ered as a CRA. Further to the 
adoption of the CRA regulation, existing CEBS guidelines will need to be amended in this area  
                                                 
10 Unless otherwise specified refere nces are to Directive 2006/48/EC 
4 Model validation – 
IRB system - Article 
84 Conditions under which supervisors permit credit institutions to use their own 
models for calculating credit risk – known as the IRB Approach 
Model validation – 
operational risk - 
Article 105 Conditions under which supervisors permit credit institutions to use their own 
models to calculate operational risk  – known as Advanced Measurement 
Approaches Technical issues, to further sp ecify existing requirements to 
strengthen supervisory convergence.  CEBS guidelines already exist 
in these areas  
Large exposures - Article 106(2), 113 CEBS are required in the amended CRD to clarify exemptions in points c) 
and d) relating to money transmission, and other exemptions provided in Article 113 Technical issue to strength en supervisory convergence 
Securitisation - 
Article 122a(10) Standards to specify due diligence and retention requirements for institutions 
involved in securitisation activity, in pa rticular regarding the measures that 
can be taken to deal with breaches of due diligence requirements. CEBS 
guidelines are required under the amended CRD Technical and practical issue to strengthen supervisory 
convergence 
Pillar 2 - Article 
124, 129(3) Standards regarding the joint decision  process for assessing a groups overall 
risk profile and capital requirements, and the application of Pillar 2 (internal capital adequacy assessment process, supervisory review process, and 
decision to require additional own fund s). Guidelines are required under the 
amended CRD Practical issue.  Supervisors best  placed to deal with cooperation-
related issues, and group risk assessments 
Colleges - Article 131a(2) Requires that operational functioning of Colleges of supervisors be based on 
written arrangements, underpinne d by CEBS guidelines  Practical issue.  Supervisors best  placed to deal with cooperation 
procedures 
Liquidity risk 
management - 
Annex V, points 15 to 17 Standards relating to the application of certain principles relating to liquidity 
risk management 
Rating agencies (ECAI) – mapping - 
Annex VI, Part 2, points 12, 13 and 14 Standards regarding the mapping of ratings external ratings into risk weights.  
CEBS guidelines already exist in this area 
Model validation – market risk - Annex 
V of 2006/49/EC Conditions under which supervisors permit credit institutions to use internal 
models to calculate their market risk . This includes specification of the 
requirements regarding the validation of internal models for incremental risk 
and migration risk and specification of the calculation of the stressed value-
at-risk Technical issues to strengthen supervisory convergence in these 
areas 
 
5 INSTITUTIONS FOR OCCUPATIONAL RETIREMENT PROVISION DIRECTIVE 
2003/41/EC 
Area Description Rationale  
Information to be 
provided to 
competent 
authorities - Article 13 There are persistent differences with regard to the amount of information that 
has to be submitted to the supervisory authority, as well as on the 
interval/frequency and the institution /party on which the reporting obligation 
lies Technical issue, to strengthen supervisory convergence.  Standards 
will enhance the level of tr ansparency and comparability 
 
  
Cross-border 
activities and 
cooperation between 
competent 
authorities - Article 21 The prudential requirements are supervised by the competent authorities of 
the home Member State, while the nationa l social and labour law relevant to 
the field of occupational pension schemes is supervised by the competent 
authorities of the host Member State. In  practice, however, for cross-border 
activity as referred to in Article 20 it is difficult to know for each Member 
State which rules fall within the scope of prudential law and which rules fall 
within the scope of national social and labour law. This, in turn, acts as a 
barrier to cross-border business. Moreover, the cooperation between competent authorities as referred to in Article 21 should be facilitated The prudential matters refer to aspects dealt with in the Directive, 
such as the maximum interest rates or the biometric tables used. The 
technical standards should specify  more clearly the rules falling 
under the mutual recognition principle and supervised by the 
competent authorities of the home Member State 
6 SOLVENCY II 
The Solvency II directive is yet to be fina lised and therefore will not be included in the October package of legislative chang es described in the introduction 
Area Description Rationale  
Transparency and 
accountability of 
supervisory 
authorities - Article 30 (a)-(e) Supervisory authorities are accountable for how they enforce compliance with 
prudential regulations. Therefore, appr opriate disclosure by supervisory 
authorities on supervisory approaches and their legal basis is necessary 
 Standards on the format and structure of the disclosures to further 
specify the key elements set out in the implementing measure could 
further improve transparency and accountability and strengthen 
supervisory convergence 
Supervisory 
reporting and public 
disclosure - Article 
35 and 55 Information to be provided by insurance and reinsurance undertakings to 
supervisory authorities and information to be disclosed to the public in the 
Solvency and Financial Condition report.  The public disclosure requirements 
aim to enhance market discipline and transparency Standards could contribute to enhanced convergence by further 
specifying the principles set out in level 2, in particular in relation to 
reporting and disclosure templates 
Prudential assessment of acquisitions
11 - 
Article 56-62 Specifications of procedure, assessment crite ria and information exchange Technical/practical issue.  To promote supervisory co nvergence 
Technical Provisions 
- Article 85 (a)-(h) Technical provisions are the main component of an insurance undertakings' 
liabilities.  Implementing measures will be developed to underpin the valuation of technical provisions Standards which further specify the requirements set out at level 2 
could contribute to ensuring the necessary flexibility whilst at the same time maintaining a level playing field 
 
Own funds - Article 
92, article 97 and article  99 Eligible own funds are classified into three tiers. The characteristics and 
criteria to do so need to be interpreted in the same way in order to ensure harmonisation Standards which further specify the principles set out at level 2 could 
contribute to ensuring the necessary flexibility whilst at the same time maintaining a level playing field 
Solvency Capital 
Requirement (SCR) 
- Article 109, 112 and 125 The SCR represents the level of capital insurers are expected to hold. Insurers 
will be able to use either the Standard Formula or an internal model to 
calculate the SCR. Implementing measures will be developed for both methods 
 If the standard formula is to remain truly risk sensitive over time, it 
may need to be regularly reviewed and if necessary updated to 
ensure that its calibration remains appropriate. Given each internal 
model will be tailored to the undertaking, it will also be difficult to 
be too prescriptive at level 2 par ticularly as practice is likely to 
evolve over time 
Information - Article 253 Information to be gathered and disseminated systematically by the group 
supervisor to other supervisory authorities or to be transmitted to the group 
supervisor by other supervisory authorities 
Disclosure - Article 
260 Information which must be disclosed and the means by which this is to be 
achieved as regards the single solvency and financial condition report The directive sets out the general principles and the future level 2 
measures could be complemented with standards in order to ensure 
the obligatory character of certain technical details such as the 
reporting and disclosure templates 
  
                                                 
11 Directive 2007/44 
7 INSURANCE MEDIATION DIRECTIVE  
2002/92/EC 
The IMD is currently under review and these issues will be covered  in its revision and the resulting legislative proposal due b y the end of 2010 
Area Description Rationale  
Professional 
indemnity insurance 
- Article 4(3) This requirement is part of the professional requirements for insurance 
intermediaries (IIM).  It obliges in surance and reinsurance IIM to hold 
Professional Indemnity Insurance covering the whole territory of the Community or some other comparable guarantee against liability arising from 
professional negligence, for at least EUR 1000000 applying  to each claim and 
in aggregate EUR 1500000 per year for all claims (certain exemptions to this rule are contained further in the article) The amounts are subject to regul ar review. Technical standards 
might establish a mechanism for carrying out these updates and 
consequently introduce a higher cl arity for (especially) supervisory 
purposes, including the precision of methods of calculation 
Information provision - Art. 12(1), (2) and (3). 
Additional legal 
basis: Art. 13 on information 
conditions Art. 12 contains a list of (minimum) information to be provided by the IIM to 
the customer prior to the conclusion of any initial insurance contract, and if necessary, upon amendment or renewal thereof 
 The current Art. 12 will be thorou ghly reviewed during the prepared 
revision of the IMD as the current minimum harmonisation does not represent the necessary guarantee fo r effective consumer protection. 
Technical standards in this ar ea might further strengthen the 
harmonisation of these standards across the Single Market 
8 TRANSPARENCY DIRECTIVE 
2004/109/EC 
Area Description Rationale  
Notification of 
major holding of 
voting rights - 
Article 12(8)(a), 13(2)(c) Standard form for the notification of major holdings of voting rights and of 
financial instruments giving access to voting rights 
Standards could establish a standard form to be used throughout the 
Community when notifying required information on holdings of voting rights to the issuer and when filing this in formation with the competent authority Relates to practical implementation of provisions of the Directive 
which is best left to supervisors. Standards could strengthen 
supervisory convergence 
Supervisory 
convergence - 
Article 24(4)  
 Standards as regards supervisory pr actices and exercise by competent 
authorities of their powers in order to ensure compliance with directive's 
obligations. Relates to the coordination and consistent exercise by competent 
authorities of their powers. This is an area where CESR already can 
adopt non-binding guidelines. However, standards in future could 
strengthen convergence. 
9 MARKETS IN FINANCIAL INSTRUMENTS DIRECTIVE 
2004/39/EC 
Area Description Rationale  
Requirements for 
authorisation - Art., 
7, 9, 10, 12  MiFID sets out various requirements that must be met before an investment 
firm can be authorised Technical Standards specifyin g certain requirements for 
authorisation (e.g. the 'fit and prop er' requirement) could help to 
ensure uniform application of authorisation process and strengthen 
convergence 
Prudential assessment of 
acquisitions - 
Articles 10- 10b  Specifications of procedure, assessmen t criteria and information exchange 
[There is currently 3L3 guidance on cross border mergers and acquisitions] Technical/practical issue.  To fu rther specify existing requirements 
to promote supervisory convergence 
Information 
exchange - Art 56-
58, 60  Requires supervisory authorities to coope rate with each other.  Standards 
could encompass templates to facilitate cooperation/information exchange 
between home andhost (e.g. such as the standard notification template referred to above)  
 Supervisors may benefit from a more standardised process.  Will 
also strengthen convergence 
 
 
10 MARKET ABUSE DIRECTIVE 
2003/6/EC 
Area Description Rationale  
Information 
exchange - Art. 16  Under the MAD regime, supervisory co-operation – a prerequisite for 
effective cross-border enforcement – is  expected to take place by way of 
exchanging information, alerting ab out suspected abuses and acting upon 
such notifications, seeking and offering assistance as well as collaborating in investigations and inspections. Templates/standards could facilitate 
cooperation/information exchange between supervisors (e.g. standard 
notification template) Competent authorities are likely to engage more willingly and more 
effectively into supervisory co-operation if some of the co-operation 
aspects are standardised and/or formalised.  
 
11 PROSPECTUS DIRECTIVE 
2003/71/EC 
Area Description Rationale  
Cooperation 
between authorities - 
Art. 22.2  Obligation of the competent authorities to exchange information and 
cooperate with each other.  Sta ndards could facilitate information 
exchange/cooperation between home/host   Supervisors may benefit from a more standardised process.  Will 
also strengthen supervisory convergence 
 
 
  
 
12 UNDERTAKINGS FOR COLLECTIVE INVESTMENT IN TRANSFERABLE SECURITIES DIRECTIVE 
85/611/EEC (work on level 2 implementing measures is ongoing. The Commission intends to adopt the measures by 1 July 2010)  
Area Description Rationale  
Content of the 
application for the 
authorisation of 
UCITS. – Art. 5(8) The UCITS Directive requires UCITS to be authorised by its home competent 
authority. The authority has to approve (i) the application of the management 
company to manage a common fund (o r the investment company, where 
relevant), (ii) the fund rules or the in struments of incorporation, and (iii) the 
choice of the depositary. Once a UCITS is  authorised in one Member State, it 
can market its units in another Member  State – subject to the notification 
procedure of Article 93 – without going again through the same process of authorisation.  Since UCITS benefit from the EU "passport", the authorisation 
process should be consistent throughout the Community. 
Competent authorities should require similar documentation, no 
matter in which Member State the authorisation is filed. In order to develop consistent supervisory practices and to ensure legal 
certainty, standards could specify the precise information that 
promoter of a UCITS has to submit to competent authorities to get the authorisation. 
Conditions for the authorisation of the management 
company and the 
investment company. – Arts. 
7(6) and 29(5) 
 UCITS management company and the self-managed investment company 
have to meet the conditions required by the Directive in order to be authorised. Once authorised, both entities can operate on a cross border basis. Since both entities benefit from a "passport" in the EU, the 
competent authorities should interpret these conditions in a consistent way. In order to develop consistent supervisory 
practices and to ensure legal certainty, standards could further 
specify the information to be provided in the application for the authorisation, the content of the programme of activities and 
operations and the description of the organisational requirements 
and conduct of business rules. In addition, the standards could further specify the criteria for assessing the suitability of the 
persons conducting the business and of qualified shareholders. 
Organisational 
requirements to minimise conflicts 
of interests – 
Art.12(3) Management companies are required to adhere to some minimum prudential 
and organisational requirements.  Level 2 provisions will set out the requirements in more detail.   Technical standards could further specify level 2 provisions to 
contribute to a common understanding and consistent application of the rules on organisational arrangements on internal control 
functions, complaints handling, personal transactions, electronic 
data processing, record keeping, accounting and organisational arrangements for minimising conflicts of interest. 
Rules of conduct  for 
management 
companies – Art 14(2) UCITS Directive requires management companies to (i) act honestly, fairly 
and with due skill, care and diligence in the best interest of the UCITS; (ii) 
employ its resources effectively and pe rforms its business activities properly; 
(iii) identify, prevent, mana ge or disclose conflicts of interests. These general 
principles will be complemented be Level 2 implementing legislation. In order to promote the common understanding and consistent 
application of conduct of business rules, technical standards could 
complement level 2 measures by further specifying due diligence requirements and criteria for identifying and managing conflicts of 
interest. 
Merger of UCITS - 
information to be 
provided to unit-
holders - Art. 43(5) UCITS involved in a merger have to provide their unit-holders with 
appropriate information (listed in Artic le 43(3)) about the merger, so that 
investors can make an informed judgem ent in advance of the operation. The 
specification of the content, format a nd method for providing the information 
will be implemented at level 2.  In order to strengthen supervisory convergence and to promote the 
same level of investor protection in the Community, technical 
standards could clarify certain el ements related to the content, 
format and method of delivery of the information. 
Clarification of 
UCITS investment Article 50 of the Directive enumerates  the categories of assets that UCITS 
can acquire and criteria according to whic h UCITS can invest. It is essential In order to ensure consistent supervisory practices throughout the 
Community and respond to market innovation, standards could 
13 criteria as referred to 
in Article 50 – Art. 
50(4)  that UCITS and the competent authorities share a common understanding of 
the investment criteria of UCITS. Due to the constant innovation in the 
financial sector, new financial instruments are very often launched in the financial markets and traditional assets are further developed or present new 
features.  provide for a common understanding of the investment criteria of 
UCITS. Standards would represent the technical specifications of 
the categories of assets and criteria enumerated in Article 50 of the 
Directive and would not modify the content or scope of such 
Article. 
Criteria for assessing 
the adequacy of the risk management 
process employed by 
a management company – Art. 
51(1) and 51(4) The risk management requirements laid down in the UCITS Directive will be 
further developed at Level 2. Level 2 measures should define the main principles governing the risk management process, in particular (i) the 
organisational arrangements, (ii) requirements on risk measurement that will 
allow fund managers to identify and manage properly the risk, (iii) report on derivative instruments.  In order to develop a common supervisory approach to risk 
management built on mutual trust between supervisors and to ensure a high standard of investor protection, technical standards 
could further specify technical aspects of risk management 
process. Technical standards would ensure the flexibility necessary to react to market deve lopments and address particular 
cases or situations. Technical st andards can further specify the 
requirements for the risk-measure ment process and the content, 
form and frequency of communications to the management 
company's home Member State re quired under article 51(1).  
Master-feeder 
structures – Arts. 
60(6),  61(3)(a) and 
(b), 62(4),  and 64(4)(a) and (b) The recast of UCITS Directive has introduced a new and detailed legal 
framework for master-feeder stru ctures. The Commission will adopt 
implementing measures specifying the re gime applicable to master-feeder 
structures. In order to strengthen supervisory convergence as well as be able 
to respond to market developments, technical standards could 
further specify elements of the level 2 implementing measures on 
the relationship between master and feeder UCITS and their depositaries and format and process for providing information. 
Specification of the 
content and format 
of the prospectus, the annual report 
and the half-yearly 
report – Art. 69(2) and (3) and Art. 73 UCITS have to keep investors and markets periodically informed by 
publishing a prospectus, an annual report and a half-yearly report. The 
information items that should be displayed in these documents are listed in Annex I of the Directive. Where a UCITS is marketed in a host Member 
State, investors should receive these do cuments in the way prescribed by the 
laws of that host Member State. Hence, the different competent authorities should interpret in the same way the in formation requirements. In particular, 
competent authorities should share a common understanding of the 
accounting requirements for UCITS. In order to ensure the same level of investors' protection 
throughout the Community and to promote consistent supervisory 
practices, standards could further sp ecify the content and format of 
the prospectus, the annual report and the half-yearly report and the 
accounting obligations for UCITS. They will consist of technical 
clarifications of the elements list ed in Annex I of the Directive.  
 
Key investor information (KII) – 
Art 78 The manager of UCITS is obliged to draw up a short document containing 
key investor information (KII). The K II shall include appropriate information 
about the essential characteristics of th e UCITS, so that investors can make 
informed investment decision and can  understand the nature and the risk 
related to investment in a UCITS. Level 2 measures will define the detailed 
content and form of the KII.  Technical standards could usefully complement these definitions, 
contributing to common understanding and consistent application 
of provisions, in particular to the preparation, presentation and 
calculation of the information to be provided in the KII. Such 
standards would contribute to ensure a consistent level of investor 
protection throughout the Community. 
Conditions for suspending the re-
purchase or the 
redemption of the UCITS are obliged to repurchase or to redeem their units at the request of any 
unit-holder. In exceptional cases, if justified, a UCITS may temporarily 
suspend the repurchase or redemption of its units, taking into account the 
interests of the unit-holders. The UCITS should inform without delay the In order to ensure the same level of investor protection and 
consistent supervisory practices throughout the Community, 
standards could further specify the conditions for the temporary 
suspension of the re-purchase or redemption of the units decided 
14 units of UCITS – 
art. 84 supervisors of the Member  States where it markets its units. by the UCITS. 
Notification of  
marketing of UCITS in host Member 
States – Art. 95 When a UCITS intends to market its units in a host Member State it must 
inform the competent authorities of its home Member State by submitting a notification letter. The pro cess of the cross-border marketing of units involves 
the competent authorities of both UCITS home and host Member States. The 
notification letter is a piece of informa tion addressed to competent authorities. In order to promote an efficient cooperation between supervisors, 
standards could further specify technical arrangements of this obligation, in particular the form  and content of the notification 
and the attestation, conditions fo r the electronic transmission of 
documentation and cooperation between supervisors.  
Procedures for exchange of 
information between 
authorities and on-
the-spot 
verifications and investigations – Art. 
105 and 101(9) The exchange of information between home and host authorities is crucial in 
order to allow supervisors to discharge their duties properly in relation to the 
cross-border activity of UCITS and their managers. Standards and procedures 
for handling requests for information should be defined in a consistent 
manner and the exchange of information should be subject to the 
confidentiality rules of Articles 102 to 104 of the Directive. In addition, 
UCITS Directive requires competent authorities to cooperate among them 
when needed to carry out on-the-spot verifications and investigations. Standards may further specify the procedures for exchange of 
information between competent authorities in order to organise an 
efficient and adequate information flow. In addition, in order to 
ensure consistent supervisory practices throughout the Community 
and to develop an efficient co operation between the competent 
authorities, technical standards co uld further specify the practical 
arrangements for cooperation between supervisors when carrying 
out on-the-spot verifications and investigations. These provisions 
are of direct concern to supervisors 
15 CRA Regulation 
 
Area Description Rationale/explanation  
Registration process, including on 
the information set out in Annex II, 
and language regime for applications submitted to the 
ESMA - Art. 21(2)(a) empowering 
provision
12 CRAs are required to submit their applicati ons for registration including necessary 
information set out in Annex II. Further in the registration process they may be required 
to provide additional information and documents to support their application for registration.  Technical issue which could strengthen 
convergence, expertise with supervisors 
 
Information that the credit rating 
agency must provide for the 
application for certification and for the assessment of its systemic 
importance to the financial stability 
or integrity of financial markets referred to in Article 5 - Art. 
21(3)(d) empowering provision
13 A CRA from a 3rd country that seeks to operate under the certification regime is 
proposed to register with the ESMA.  The ESMA may take a decision on registration 
only after it establishes that specific conditions are met, on the basis of information provided by the overseas CRA in accordance  with Article 5. Not being of systemic 
importance to the financial stability or integrity of financial markets is one of the 
preconditions for such certification.  Technical issue which could strengthen 
convergence, expertise with supervisors 
 
Presentation of the information, including structure, format, method and period of reporting, that credit 
rating agencies shall disclose in 
accordance with Ar ticle 11(2) and 
point 1 of Part II of Section E of 
Annex I - Art. 21(2)(d) 
empowering provision
14 A CRA to make available in a central repository established by CESR information on its 
historical performance data including the ratings transition frequency and information about credit ratings issued in the past and on their changes. In future, ESMA could make 
that information accessible to the public an d shall publish summary information on the 
main developments observed on an annual basis. (Art. 11(2), Annex I.E.II.1) Technical issue which could strengthen 
convergence, expertise with supervisors  
                                                 
12 Under existing text of the CRA Regulation to be developed as guidance by CESR 
13 Under existing text of the CRA Regulation to be developed as guidance by CESR 
14 Under existing text of the CRA Regulation to be developed as guidance by CESR 
16 ANTI MONEY LAUNDERING DIRECTIVE 
2005/60/EC 
Area Description Rationale/explanation  
AML consolidated 
group approach - 
Article 31(1) + 34(2) Sets out the high level principle requiring EU financial institutions to 
establish adequate and a ppropriate policies and procedures of customer due 
diligence, reporting, record keeping, inte rnal control, risk assessment, risk 
management, compliance management and communication equivalent to those defined by the Directive in their branches and majority-owned 
subsidiaries located in third countr ies. Non-cooperative countries and 
jurisdictions constitute a specific subset of third countries that deserve peculiar attention. Technical standards could be developed to establish minimum 
criteria and practices for the supervision of compliance by EU 
credit and financial institutions with AML consolidated group 
approach and the "know-your-structure" principle in Articles 31(1) and 34(2) in connection with non-cooperative countries and 
jurisdictions 
 
Supervisory convergence - Article 37 Standards as regards
 supervisory practices and exercise by competent 
authorities of their powers in order to ensure compliance with the directive's obligations 
 Relates to the coordination and consistent exercise by competent 
authorities of their powers. In th is area, CESR already can adopt 
non-binding guidelines. However, binding standards may be 
needed in future in this area  to strengthen convergence. 
 
1  
 
ANNEX 4  
 
Summary of replies received to the pu blic consultation on the Commission 
Communication of 27 May 2009  
 
 
 
 
Submissions received  
 
The total number of submissions received to date in reply to the public consultation on financial supervision is 98 (including those wh ich arrived after the deadline of 15 July 2009). 
The breakdown is as follows:  EU Member States (finance ministries, central  banks and supervisors):         8 
Other public bodies (including EFTA/EEA, 3L 3 committees, international bodies):  5 
EU and national associations of undert akings, individual undertakings   66 
Consumer and other user associations:         7 T r a d e  U n i o n s :              7  Private citizens:            5  A full list of contributors is provided in annex.   
General remarks
 
 
Most contributions welcome the Communicati on and broadly support its conclusions, while 
several request more information or details and ask the Commission to allow for sufficient time in the process following the Communicati on. Moreover, many of the submissions cover 
not only issues related to the supervisory framework from the Communication but also other 
supervisory and regulatory issues.  
EU Member States (finance minist ries, central banks and supervisors)
 
 
Submissions were received from public authoriti es in 7 Member States (for some Member 
States more than one submission was received from different public bodies – see annex). It 
should be noted, however, that in addition, Memb er States have reached conclusions in the 
Ecofin and European Council of 9 June and 18-19 June 2009 respectively, in which they 
recommended that a European System of Fina ncial Supervisors (ESFS), comprising three new 
European Supervisory Authorities (ESAs), is es tablished combined with  a single European 
rule book applicable to  all financial institutions.  They  also supported the creation of a 
European Systemic Risk Board to monitor systemic risks.  With regard to micro-supervision , all submissions from Member States strongly or cautiously 
support the establishment of th e ESFS, with the exception of the Czech Central Bank and the 
Czech Senate's EU Committee, which among ot her things made a number of comments 
regarding the quality of the impact assessment accompanying the Commission Communication. Contributions generally make s uggestions or express concern on specific 
issues concerning the structure and the powers of the ESAs, such  as the voting procedures, the 
2 independence; several submissions stress the n eed to clarify the scope of the Authorities' 
powers to settle disputes and to  act in emergency situations. 
 On macro-supervision , some replies strongly support the creation of the ES RB while others 
support it conditionally upon further details being provided. Two submissions favour an elected Chair of the ESRB, while another one supports the ECB as Chair. Further comments 
suggest that warnings and recommendations should not be channelle d to the relevant 
addressees via the Council, but rather through the new ESAs.  
 
Other public bodies (including EFTA/EEA, 3L3 committees, international bodies)
 
 
The EFTA Authority  and the Norwegian Ministry of Finance  request observer representation 
of EFTA-EEA countries on both the ESFS and the ESRB. The EFTA Authority argues that, 
since EEA supervisors participate in many co lleges of supervisors, they should also 
participate in ESA board discussi ons on individual institutions. 
 The joint response of the Level 3 Committees is supportive of the Communication (the Czech 
representatives have not subscribed the response). On micro-prudential supervision , the 
Committees emphasise the need for regulatory, supervisory, institutional and financial 
independence of the Authorities, and request that the Commission should only endorse or 
reject, but not amend any technical standa rd developed by the new Authorities.   
 The IMF supports binding decision making powers of the three ES As. It underlines the need 
for the ESRB to obtain prudential information also on individual systemic financial groups. 
The IMF also points out that representatives of  central banks and supervisory authorities, 
which are among the main potential recipients of ESRB risk warnings and recommendations, 
constitute a majority on the ES RB Joint Committee, and is con cerned that this may undermine 
the ESRB's ability to come to clear and appropriate warnings and recommendations to those bodies.  
Sectoral associations and individual undertakings
 
 
This category of submissions, with 66 responses , forms the bulk of the contributions received, 
and views are diverse.  In terms of the Commissions proposed timetabl e, some submissions support the time table, 
while others consider it too ambitious and under line the need for time to apply principles of 
better regulation. Several submissions stress that the reforms primary objective should be to 
improve the quality of supervision and ensure th at it is in line with developments at the 
international level so as to fo ster global supervisory converg ence. Many submissions request 
that additional reporting burdens for indus try should be either avoided or strictly 
proportionate, and request sufficien t safeguards to be in place re garding the confidentiality of 
data on individual firms.   Most submissions concerning micro-prudential supervision support the proposals for an ESFS 
with varying degrees of caution, while some su bmissions request that the proposals should not 
undermine the role of the Commission and the ach ievements in the single market, such as 
passporting regimes. Several submissions s uggest strengthening the independence of the 
Authorities, questioning for example whether th e Commission should participate in the ESAs, 
and underlining the importance of financial i ndependence and adequate staffing; others 
3 however stress the need for adequate political  accountability. Many submissions stress the 
need for private sector consultation.   Turning to decision making powers, submissions  mostly support that the Authorities should 
develop technical standards. Many submissions  stress that day-to-day supervision should 
remain at the national level; a number of replies request that colleges of supervisors should be 
the heart of supervision for cross-border group s, with a primary role for the home country 
supervisor (i.e., lead superviso r), counter-balanced by the possibi lity for other authorities to 
request settlement by the Author ities (and EU level oversight) ; some also advocate a single 
European supervisor for cross-border groups in the medium term. Other submissions are 
however opposed to binding dispute settlement . On the question of direct EU-level 
supervision of cross-border groups, several submissions support su ch powers over Credit 
Rating Agencies (CRA), while submissions are divided on similar powers over Central 
Counterparties (CCP).   Several contributions point to the difference s between the banking sector on the one hand and 
the occupational pensions and the insurance sector on the ot her, with one suggestion to 
include pensions in the mandate of the Eur opean Securities and Markets Authority (ESMA), 
and another to have a specific consul tative panel on occupational pensions. 
 Submissions concerning the macro-prudential  proposals support the Communication either 
cautiously or more openly. A number of replie s emphasise the importa nce of avoiding double 
reporting requirements and of confidential tr eatment of information received, with some 
submissions opposing the transfer of disaggregated data to the ESRB altogether, or only after 
prior consultation of the indus try. Submissions request ade quate industry consultation, and 
representatives from the insurance, occupa tional pensions, and securities industry are 
concerned that the ESRB's focus may be skewed  towards banking and their views may not be 
adequately represented. Other submissions sugg est that independent personalities should be 
part of the ESRB board, that ESRB warnings  should remain confidential, and question 
whether the comply-or-explain mechanism will be sufficient to ensure effective follow-up to 
ESRB recommendations, suggesting a mandatory follow-up.   
Consumer bodies
 
 
Of the 7 submissions from consumer and end-us er associations, most express cautious support 
on the Communication but also con cerns regarding the level of ambition in particular with 
regard to various aspects of consumer prot ection, pointing for example to the consumer 
protection agency proposed in the US and arguing that a similar body should be established in the EU. One submission criticises that the impa ct assessment is too superficial on effects on 
stakeholders. With regard to governance as pects, several replies request stakeholder 
representation in the ESFS Supervisory Board and Joint Committee and the ESRB board and 
request obligations to consult st akeholders and a user panel. Ot her proposals are to introduce a 
right for consumers and investors to refer cas es of non-compliant financial products to the 
Authorities for decision, and to make the propos ed micro-prudential data base available to the 
market. Several submissions support the propo sed decision making powers, including the 
powers over CRAs and CCPs.  
Trade Unions
 
 
4 Most of the submissions of 7 trade unions sup port a stronger coordina tion at the European 
level, but some argue that the Commission shoul d go much further. They request frequent 
consultation of employees by bot h micro- and macro-level supe rvisors and at least one union 
requested the establishment of formal 'whistle  blower' procedures. Submissions vary on the 
political accountability of the ESFS and the ESRB. On micro-prudential supervision , 
submissions stress the importan ce of staffing. One submission re quests that host authorities 
should be able to refer issues of inadequate su pervision of products by ho me authorities to the 
ESAs for decision, and several submissions we lcome that the ESAs should have decision 
making powers, while views are divided on the suggested powers over entities with a 
Community-wide reach. On macro-prudential supervision , one submission suggests to 
publish all ESRB warnings and recommendations.  
5  
Annex - List of public submissions received  
 
 
EU Member States  (finance ministries  central banks  and supervisors) and 
other public bodies  
 
1. Swedish Central Bank/Supervisor 
2. Czech National Bank 
3. Finnish Ministry of Social Affairs and Health 
4. Polish Financial Supervision Authority 
5. Romanian government 
6. Austrian government 
7. Czech Senate EU Committee 
8. NL Government 
 
Total: 8 
 
Other public bodies (including EFTA/EEA, 3L3 committees, international 
bodies) 
 
1. EFTA/EEA Standing committee 
2. Norwegian Minister of Finance 
3. 3L3 Committees joint response 
4. Jersey Financial Services Commission 
5. IMF Staff 
Total: 5 
 
Industry – sectoral associations  
 
 
1. Af2i 
2. Alternative Investment Management Association Limited (AIMA) 
3. Association Française de la Gestion financière (AFG)* 
4. Association of British Insurers ABI 
5. Association of German Banks (BDB)* 
6. Association of Internationa l Life Offices (“AILO”) 
7. Associazione Bancaria Italiana 
8. Austrian Federal Economic Chamber 
9. Austrian Insurance Association (VVO) 
10. British Bankers' Association (BBA)* 
11. BVI Bundesverband Investment und Asset Management 
12. CGPME* (in French) 
13. City of London 
14. Comité Européen des Assureurs (CEA)* 
15. Confederation of british Industry (CBI) 
16. Danish bankers Association 
17. EFAMA (European Fund and Asset Management Association)* 
18. EFRP (European Federation for Retirement Provision)* 
19. European Association of Central Counterparty Clearing Houses* 
20. European Association of Cooperative Banks (EACB) 
21. European Association of Public Banks (EAPB) 
22. European Banking Federation (EBF) 
23. European Federation of Insurance Intermediaries (BIPAR)* 
24. European Financial Services Round Table* 
25. European Savings Banks Group 
26. European Issuers 
27. Fédération Bancaire Française* 
6 28. Fédération Française des Soci étés d'Assura nces (FFSA)* 
29. Federation of Finnish Financial Services* 
30. FEE - Federation des Experts comptables Europeens 
31. Futures and Options Association 
32. German Insurance Association * 
33. German public savings- and giro-banks (BVR, VÖP, VDP, DSG) 
34. ICAEW (Institute of Chartered Acc ountants in England and Wales) 
35. ICMA (International Capital Market Association)* 
36. International Financial Services London (IFSL) 
37. International Training Centre for Bankers* 
38. International Underwriting Association (IUA)* 
39. Investment & Life Assurance Group (ILAG)* 
40. Investment Management Association 
41. l’AMAFI, Association française des marchés financiers* 
42. Law Society of England & Wales 
43. LIBA, SIFMA, and ISDA 
44. Luxembourg Bankers' Association's (ABBL)* 
45. MEDEF - Mouvement des Entreprises de France* 
46. Pan European Insurance Forum (PEIF) 
47. Polish Bank Association 
48. Quoted Companies Alliance 
49. Swedish Bankers' Association 
50. Swedish Securities Dealers Association* 
51. XBRL Europe* 
 
Total: 51 
 
Industry – individual undertakings  
 
1. Aviva 
2. BNP Paribas 
3. Bolsas y Mercados Españoles (BME) 
4. Crédit Agricole* 
5. Deutsche Börse Group* 
6. Goldman Sachs International 
7. ING Group* 
8. Intesa Sanpaolo* 
9. MAF, MACSF, SMABTP and SHAM (insurers) 
10. NasdaqOMX 
11. Nordea 
12. NYSE Euronext 
13. PriceWaterhouseCoopers 
14. Standard Chartered Bank 
15. UniCredit* 
 
Total: 15 
 
Consumers/investors organisations  
 
1. UK Financial Services Consumer Panel 
2. CFA Institute Centre for Financial Market Integrity* 
3. Verbraucherzentrale Bundesverband* 
4. FINUSE 
5. Association fédérative internationale des porteurs d'emprunts russes 
(AFIPER)* 
6. La Voix des Emprunts Russes* 
7. BEUC* 
 
7 Total: 7 
 
Trade unions/Social partners  
 
1. Standing Committee of European Central Bank Unions* 
2. Nordic Bank, Finance and Insurance Unions (NFU)* 
3. Financial Sector Union of Sweden 
4. German Trade Union Confederation (DGB) (NB in German) 
5. Unite the Union 
6. Bundesarbeitskammer Austria (BAK)* (in German) 
7. UNI Europa Finance Union 
Total: 7 
 
Private Individuals/academics/others  
 
1. Paul Goldschmidt 
2. Antonio Lambe 
3. University of Luxembourg 
4. Adam Smith Institute* 
5. Godfrey Bloom MEP (UKIP) 
 
 
Total: 5 
 
 
 
ANNEX 5  
 
European Council Conclusions of 18/19 June 2009  
 
 
19. The communication presented by the Co mmission on 27 May 2009 and the Council 
conclusions of 9 June 2009 set the way fo rward to the establishment of a new 
framework for macro- and micro-prudent ial supervision. Th e European Council 
supports the creation of a European Syst emic Risk Board which will monitor and 
assess potential threats to financial stability and, where necessary, issue risk warnings 
and recommendations for action and monito r their implementation. The members of 
the General Council of the ECB will elect th e chair of the European Systemic Risk 
Board. 
 
20. The European Council also recommends that a European System of Financial 
Supervisors, comprising thr ee new European Supervisory Au thorities, be established 
aimed at upgrading the quality and consiste ncy of national superv ision, strengthening 
oversight of cross border groups through th e setting up of supervisory colleges and 
establishing a European single rule book applic able to all financial institutions in the 
Single Market. Recogniz ing the potential or c ontingent liabilities that may be involved 
8 for Member States, the European Counc il stresses that decisions taken by the 
European Supervisory Authorities should not impinge in any way on the fiscal 
responsibilities of Member St ates. Subject to this and su pplemental to the Council 
conclusions of 9 June 2009, the European Counc il agrees that the European System of 
Financial Supervisors should have binding and proportionate decision-making powers 
in respect of whether supervisors are mee ting their requirements under a single rule 
book and relevant Community law and in the case of disagreement between the home 
and host state supervisors, in cluding within colle ges of supervisors. ESAs should also 
have supervisory powers for credit rating agencies. The European Council further emphasizes the importance of ensuring that the new framework supports sound and competitive EU financial markets. 
 
21. The European Council welcomes the Comm ission's intention to bring forward, by 
early autumn 2009 at the latest, the legisl ative proposals to put in place the new 
framework for EU supervision, fully resp ecting the balance of competences and 
financial responsibility and  taking full accoun t of the Council conc lusions of 9 June 
2009. These proposals need to be adopted swiftly in order for the new framework to be fully in place in the course of 2010. The European Council will take stock of 
progress at its meeting in October 2009 and w ill if necessary provide  further direction. 
 
22. It is equally important to further adva nce work on building a comprehensive cross-
border framework for the prevention and management of financial crises. The 
European Council invites the Commission to  make concrete proposals for how the 
European System of Financial Supervisor s could play a strong coordinating role 
among supervisors in crisis situations, while fully respecting the responsibilities of national authorities in preserving financial stability and in crisis management in 
relation to potential fiscal consequences  and fully respecting central banks' 
responsibilities, in particul ar with regard to the provi sion of emergency liquidity 
assistance.