EN    EN EN 
EN    EN  EUROPEAN COMMISSION 
Brussels, 8.12.2010 
SEC(2010) 1496 final 
  
COMMISSION STAFF WORKING PAPER 
IMPACT ASSESSMENT  
 
 
Accompanying document to the 
  
COMMUNICATION FROM THE CO MMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMI TTEE OF THE REGIONS 
 
Reinforcing sanctioning regimes in  the financial services sector 
   
{COM(2010) 716 final} 
{SEC(2010) 1497 final} 
EN 2   EN TABLE OF CONTENTS 
1. Introduction................................................................................................................ .. 3 
2. Procedural Issues and Consulta tion of Interested Parties ............................................ 4 
2.1. Consultation of interested parties and procedural issues ............................................. 4 3. Policy context, Problem de finition and Subsidiarity.................................................... 5 
3.1. Background and context............................................................................................... 5 3.1.1. Nature and size of the market concerned ..................................................................... 5 3.1.2. Number of infringements/ orde r of magnitude of sanctions ........................................ 6 
3.1.3. Overview of legislative framework............................................................................ 10 3.2. Problem definition...................................................................................................... 11  
3.2.1. Affected stakeholders................................................................................................. 17  
3.2.2. Baseline scenario....................................................................................................... . 17 
3.3. The EU's right to act and justification........................................................................ 20 3.3.1. Subsidiarity principle ................................................................................................. 2 1 
3.3.2. Proportionality......................................................................................................... ... 22 
3.3.3. Fundamental Rights ................................................................................................... 22 4. Objectives.................................................................................................................. . 23 
5. Policy Options, impact analysis and comparison....................................................... 24 5.1. Policy options relating to th e content of the measures............................................... 24 
5.1.1. Preferred policy options ............................................................................................. 37 5.1.2. Cumulative impacts of the preferred options............................................................. 37 5.1.3. Impact on EU budget: ................................................................................................ 38 5.2. Options relating to the nature of the measures........................................................... 39 5.2.1. Preferred policy instruments ...................................................................................... 41 6. Monitoring and Evaluation ........................................................................................ 41 
ANNEX 1........................................................................................................................ ......... 42 
ANNEX II ....................................................................................................................... ......... 43 
EN 3   EN 1. INTRODUCTION  
The financial crisis has unveiled a number of regulatory and supervisory failures which should 
be tackled in order to repair  and strengthen the financial sector. Effective sanctions and 
sanctioning powers are a key element of a supervisory regime which should ensure sound and stable financial markets and, ulti mately, the protection of consumer s and investors. As such they 
have attracted significant political  attention over the last years. 
The Ecofin Council of 4 December 2007, when revi ewing the functioning of the Lamfalussy 
process, invited the Commission to  "study the differences in s upervisory powers and objectives 
between national supervisors, to conduct a cross-s ectoral stock-taking exerci se of the coherence, 
equivalence and actual use of sanctioning powers among Member States and the variance of 
sanctioning regimes and where necessary to  define an adequate set of powers". 
The Larosière report on supervision recognize d the important role of  sanctioning regimes: 
"Supervision cannot be effective with weak, highly variant sanctioning regimes. It is essential 
that within the EU and elsewhere, all supervisor s are able to deploy sanctions regimes that are 
sufficiently convergent, strict, re sulting in deterrence. This is far from being the case now." The 
corresponding measure proposed is: "in the firs t stage, EU should also develop a more 
harmonised set of financial regulations, s upervisory powers and sanctioning regimes" 
(Recommendation 20). The recommendations of the Larosière report were broadly endorsed by 
the Commission's Communication "Driving European recovery" of 4 March 2009. One of its 
five key objectives is indeed: "To ensure more effective sanctions against market wrongdoing". – 
To this end, the Commission announced its inte ntion to come forward with proposals on how 
sanctions could be strengthened in a harmonised manner and better enforced. 
In its conclusions of 19-20 March 2009, the Eur opean Council called for better regulation of 
financial markets, in particular as regards "r igorous enforcement of financial regulation and 
transparency, backed by effective, proportionate  and dissuasive sanctions, in order to promote 
integrity in financial markets."  
In its Communication "Regulating Financial Servi ces for sustainable grow th" of 2 June 2010, the 
Commission committed itself to carry out a revi sion of existing sanctioning powers and their 
practical application an d announced a Communication on sancti ons in the financial services 
sector aiming at promoting convergence of sancti ons across the range of supervisory activities. 
At the international level, strengthening sanctioni ng regimes is a priority of the financial sector 
reform. In the summit held in Washington on 15 November 2008, G20 leaders agreed on the 
implementation of an Action plan for Reform of  financial markets including actions aimed at 
protecting markets and investors against illicit conduct and ensuri ng that appropria te sanctioning 
regimes are in place. Increasi ng regulatory enforcement and remedies is also one of the 
objectives of the recent US financial regulation reform
1. 
This impact assessment defines the problem and e xplains the need for a nd the objectives of EU 
level action in the field of sancti oning regimes. It also provides an  analysis of the rationale, the 
alternatives and the impact of the Commissi on proposals on how sanctioning regimes may be 
approximated at EU level, which are presen ted in the Communication on sanctions in the 
                                                 
1 Dodd-Frank Wall Street Reform and Consumer Protection Act, 
<http://financialservices.house.gov/si nglepages.aspx?NewsID=3&RBID=775 > (21 July  2010). 
EN 4   EN financial sector. It will  be followed by a more comprehensive and detailed impact assessment for 
the envisaged proposals.  
KEY CONCEPTS:  
Sanctioning regimes : legal framework covering  sanctions provided for in national legislation 
for the violations of EU financial services rule s - including: type (administrative and criminal, 
pecuniary and non-pecuniary) and level of sanctions , addressees of sanctions, factors to be taken 
into account in the application of sancti ons - and actual enforcement of sanctions. 
Effectiveness, proportionality and dissuasiveness  of sanctions : to be effective, sanctions must 
achieve the aim of the legisla tive act, to be proportionate, they  must adequately reflect the 
gravity, nature and extent of the loss and/or ha rm and must not go beyond what is necessary for 
the objectives pursued; and to be dissuasive, sanctions must deter future infringements. 
2. PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES  
2.1. Consultation of interested pa rties and procedural issues 
Following the above-mentioned request from the ECOFIN Council, in 2008, the European 
Commission invited the European Committees of  Banking Supervisors (CEBS), of Securities 
Regulators (CESR) and of Insurance and Occ upational Pensions Supervisors (CEIOPS) to 
provide assistance in conducting a review of s upervisory powers and sanctioning regimes across 
Europe in the financial services sector. Th e main purpose was to ascertain whether such 
sanctioning regimes are sufficiently equiva lent / convergent in their effect.  
The above mentioned Committees of Supervisors car ried out studies in each of the three main 
sectors concerned (banking, in surance, securities, herein after referred to as "the 
CEBS/CEIOPS/CESR reports"2). Their reports provide inform ation as regards administrative 
sanctions (both pecuniary and non- pecuniary) and criminal sancti ons (in the securities field). 
CEBS and CEIOPS reports also provide some in formation on the actual use of sanctions since 
2005. 
The Commission services carried out a first internal  analysis of the type of sanctions envisaged 
in national legislation, the maximum level of t hose sanctions, the factor s taken into account in 
determining the level of sanctions and finally, the effectiveness of their application. Those issues 
have also been discussed with Member States and the comments received have been taken into 
account in this impact assessment. Overall, they agreed on the need to promote further 
convergence of national sanctioning  regimes while underlying the need  to be respectful of the 
different national legal framewor ks and judicial systems. A num ber of Member States stressed 
that the objective should not be to have full uni formity, but rather a minimum set of powers as 
well as an attempt to reduce divergences.  
An Impact Assessment Steering group was set up to steer the preparation of this Impact 
Assessment, comprising representatives from DGs: MARKT, ECFIN, SG, SJ, ENTR, EMPL, 
COMP, SANCO, JUST. The Steering group met on  5 July, on 19 July and on 17 September 
                                                 
2 Available on < http://www.c-ebs.org/home.aspx >, < http://www.cesr-eu.org/ >, and 
<https://www.ceiops.eu/ > (20 September 2010). Information contained in these reports have been 
subsequently updated on the basis of the contributions received from member States. 
EN 5   EN 2010.This impact assessment takes into account the comments made by the members of the 
group. 
This Report was sent to the Impact Assessment Board on 27 September. The Board discussed the 
report in its hearing on 22 Oct ober 2010. The Board discussed the report on its he aring on 20 
October 2010. The following changes have been  implemented following the Board's opinion: 
comparative data have been included on size of the banking markets and number of sanctions 
imposed; an additional option has been added for issue 1 and the scope of  the action envisaged 
for pecuniary sanctions has been broadened; th e reasons why changes in national legislations 
seem necessary have been better explained; the impact of the sel ected options on third countries 
and particularly US has been addressed 
3. POLICY CONTEXT , PROBLEM DEFINITION AND SUBSIDIARITY  
3.1. Background and context 
Completing the single market in fi nancial services is recognised as  one of the key areas for EU's 
future growth and jobs, essential for EU’s global competitiveness and thus a crucial part of the economic reform process: the more integrated financial markets are, the more efficient the 
allocation of economic resources and long-run economic performance will be. However, only when rules are enforced effectively, can comp anies and citizens benefit from access to safe 
European markets.  
3.1.1.  Nature and size of the market concerned  
The EU is one of the key players in global financ ial services: its contribution to world financial 
services accounts for 25% to 50% in key segments of financial markets
3 (Chart 1 in Annex II 
gives an overview of the size of  European financial markets. 
The wholesale financial sector, which is concer ned by many of the sancti ons discussed in this 
Impact Assessment, is of decisive importan ce for the EU economy and plays a key role in 
ensuring that the entire economy can make the investments necessary for sustainable growth. 
Indeed, the sector’s output was worth an estimated €219bn in 2008, while it employs almost 1.4 
million people, and exports of wholesale fina ncial services by EU countries account for a 
significant proportion of world trade in services 4 The role of the wholesale financial sector is 
also significant in terms of value added in the economy and of employment. For instance, 
financial intermediation and insurance and pe nsion funding, which respectively accounted for 
4,7% and 1% of EU-25 total valu e added (2007), have been identified as some of the most 
important sectors for the EU economy5. The European financial market is becoming more and 
more integrated, particularly in the wholesale financial sector, and there are a growing number of 
large financial groups and infrastructures ope rating on a pan-European basis. Although the 
financial crisis led to increased market segmen tation, the level of financ ial integration remains 
high.  
                                                 
3 See European Financial Integration report 2009 (EFIR 2009), 
<http://ec.europa.eu/internal_market/finances/fim/index_en.htm > 
4 London Economics, report "The importance of wholesale financial services to the EU economy 2009", 
September 2009 
5 See Commission staff working document "'Implementing the new methodology for product market and 
sector monitoring: Results of a first sector screening' accompanying the Commission Communication of 
2007 "A single market for 21st century Europe", COM(007)274 final. 
EN 6   EN The banking and insurance markets are dominated  by pan-European groups active in several 
Member States, whose risk management functions  are centralised in the group's headquarters. 
Currently around 70% of EU banking assets is in the hands of some 40 banking groups with 
substantial cross-border  activities. Esp ecially in the EU -12, banking markets are dominated by 
foreign (mostly Western European) financial groups (see Chart 2 in Annex II). In these 
countries, on average 65% of banking assets ar e in foreign-owned banks. In countries like 
Estonia, the Czech Republic and Slovakia over 92% of banking assets are in foreign-owned 
banks. 
3.1.2.  Number of infringements/ orde r of magnitude of sanctions  
It is by definition impossible to obtain reliable estimates about the number and importance of 
undetected violations of the law in any area. Nevertheless, the number of sanctions actually 
imposed by Member States provides an indica tion of the number and importance of detected 
violations of financial services legislation. Information provi ded in competent authorities' annual 
reports, and other information in the possessio n of the Commission, provide some data on the 
number of sanctioned violations in the reference periods for viol ations of banking legislation and 
of market abuse rules. The number of actual vi olations is likely to be much higher.  
Regarding the range of sanctions available on the statute book, Chart 3 and 4, covering most 
Member States gives a guide to the sanctions ava ilable for violations of MiFID and MAD. It can 
be immediately seen that there is  a wide range, particularly as regards fines (administrative and 
criminal). 
Chart 3 – Range of financial sanctions (administrative and criminal) (legal persons) and terms of 
imprisonment for natu ral persons (MiFID). 
0102030405060
BE BG CZ DK DE EE IE EL ES FR IT CY  LV LT LU HU MT NL AT PL PT RO SI SK FI SE UKEUR (100,000)/years 
max criminal fines max administrative fines imprisonment
 
Comments: administrative fines are unlimited in DK and UK; criminal  fines are unlimited in FI and DK. However, in DK the level of fines is 
limited by case law currently at a level of DKK 5000 - 25000 (appr oximately € 670 – 3355). Maximum fines are: FR: EUR 1.5 milli on or ten 
times the unlawful gains. EL: EUR 3 million or twice the unlawful ga ins. In ES, maximum fine is up to the highest of the follow ing amounts: 5x 
gross profit obtained as a result of the act s or omissions comprising the infringement; 5% of the infringing firm's own funds; 5% of the total funds 
involved in the infringement or EUR 600 000. No information for PL. 
EN 7   EN Source: CESR report, p. 182-184 and contributions from MS  
Chart 4 – Range of administ rative and criminal fines and terms of imprisonment for insider dealing (Art. 2 
MAD). 
0102030405060
BE BG CZ DK DE EE IE EL ES FR IT CY  LV LT LU HU MT NL AT PL PT RO SI SK FI SE UKEUR (100,000)/years 
max criminal fines max administrative fines imprisonment
 
Comments: UK and DK: unlimited criminal fines. However, in DK th e level of fines is limited by case law currently at a level of  DKK 5000 - 
25000 (approximately € 670 – 3355). In nine other Member States, if the gains from  an infringement are quantifiable and exceed the maximum 
amount of the relevant sanction, the set amount of the fine can be exceeded. (BE, DE, ES, FR, IT, LT, LU, NL, RO, UK). In ES, m aximum fine is 
up to the highest of the following amounts: 5x gross profit obtai ned as a result of the acts or omissions comprising the infrin gement; 5% of the 
infringing firm's own funds; 5% of the total funds involved in the infringement or EUR 600 000. 
Source: CESR report, summary of February 2008, p. 15-17 and contributions from MS 
The information available to the Commission about  sanctions actually imposed concerns mainly 
the banking sector, and (for certain  Member States only) the securi ties sector. The difficulty of 
gathering this information is illustrative itself of the lack of transparency regarding sanctions. In the banking sector, some Member States imposed  no sanctions whatever during that period, and 
others imposed less than 25 sanctio ns per year, including some Me mber States with very large 
financial markets. Chart 5 shows that the number of sanctions applied differs considerably even 
between Member States with banki ng sectors of a similar size, as  approximately estimated on the 
basis of the value of  the banks' assets.  
EN 8   EN Chart 5: Number of sanctions imposed in 2007 and value of banks' assets in some Member States 
Sanctions and assets 2007
02004006008001000120014001600
AT BE DK FR DE EL IE IT LU NL PT SE ES
Member StateNumber of 
sanctions
05001000150020002500300035004000
Value of assets 2007Value of
assets(billioneuro)
Number ofsanctions2007
 
Source: CEBS report, page 55, BIS st atistics and contributions from MS 
Chart6, compiled from input from Member St ates, gives an overview of the amount of 
administrative financial sanctions  imposed in the banking sector  (compared with the range of 
sanctions, that is the minimum and maximum levels  provided for in the legislation). From this 
table it can be seen that the majority of Member  States, imposed little or  no sanctions during that 
period. It also shows that in most cases where a wi de range of sanctions ar e allowed in the statute 
book, including very high sanctions, that range of sanctions is not effectively imposed. Only in 
three Member States was a significant amount of  sanctions, totalling over one million euro, 
actually imposed in the banki ng sector during that period. 
Chart 6 – Range of (financial) administrative sanctions against legal persons, and sanctions applied from 
2005 to 2007 (in Euros) 
05000001000000150000020000002500000300000035000004000000450000050000005500000
BE BG CZ DK DE EE IE EL ES FR IT CY  LV LT LU HU MT NL AT PL PT RO SI SK FI SE UKEUR
Range of financial sanctions Sanctions applied 
 
 
Comments: Fines unlimited in DK and UK. Maximum fines are linked to equity capital (RO, ES), turnover (HU, LT), or an alternati ve maximum 
figure, as indicated in the table. FR: ma x fines EUR 50 million. FI:  fines not app licable to credit institutions. IT – fines c an be cumulatively 
applied to natural persons and can exceed th at amount in case of repeated violations. 
Source: CEBS report, p. 50-52 and cont ributions  from national authorities. 
EN 9   EN Chart 7 gives an overview of the maximum fine s against legal persons foreseen in national 
legislations in the insurance sect or and the amounts of administrati ve financial sanc tions actually 
imposed. It shows important differe nces in the maximum fines fore seen in national legislations. 
In eight member States no fine wa s imposed during the period 2005 to 2007. 
Chart 7 – Range of (financial) administrative sanctions against legal persons (available in 2005-2007), and 
sanctions applied from 2005 to 2007 (in Euros)  
05000001000000150000020000002500000300000035000004000000450000050000005500000
BE BG CZ DK DE EE IE EL ES FR IT CY  LV LT LU HU MT NL AT PL PT RO SI SK FI SE UKEUR
Max financial sanctions Max sanctions applied
 
Comments: DK, NL and UK – fines are unlimited. However, in DK the level of fines is limited by case law currently at a level of  DKK 5000 - 
25000 (which approximately is € 670 – 3355). RO: the amounts of fi nes are linked to turnover or capital. PL: the amount of fine s is linked to 
gross written premium, FR: maximum fines EUR 50 million. No fines available in FI. No information available for EL. 
Source: CEIOPS report, pg.  119-123 contributions fr om national authorities 
For the securities sector (specifically for market  abuse), chart 8 shows the number of financial 
sanctions imposed annually in certain years, for those Member States fo r which the Commission 
has information. 
Chart 8: Number of financial sanctions imposed in some Member States6 
Member 
State Financial sanctions imposed – number (year) 
DE 16 (2008), 7 (2007), 20 (2006) – criminal financia l sanctions imposed by th e judicial authorities7 
FR 48 (2008), 48 (2007), 31 (2006)8 
UK 6 (2008), 1(2007),9 6(2006) – does not include criminal fines imposed  
                                                 
6 Sources: Annual Reports 2006, 2007 and 2008, http://www.cbfa.be/fr/sanc/sanc.asp (29  July 2010). 
7 Source: Annual Report 2008, p. 158; Report 2007, p. 162. Also to be taken into account are cases in which 
proceedings were terminated following a payment – 17 in 2006, 14 in 2007 and 12 in 2008. additional information by DE authorities. 
8  Source: Annual report 2008, p. 197; Annual report 2007, p. 197; Annual Report 2006, p. 227; additional 
information by FR authorities 
EN 10   EN IT 6 (2008); 17 (2007) (no information for 2006) 10 
ES 11 (2008), 14 (2007) – number of sanctions imposed "mainly concer ning market abuse"11  
NL 4 (2008), 2 (2007), 1 (2006) – financial sanctions 12 
BE 1 (2008), 2 (2007), 1 (2006) 13 – does not include criminal fines imposed by the judicial authorities 
LU 0 (2006), 0 (2007), 0 (2008) 14  
AU  21 (2008)15 – does not include cr iminal fines imposed 
CY 6(2008) 
PL 8(2008), 11 (2007), 4 ( 2006) – only crim inal sanctions imposed by the courts 
3.1.3.  Overview of legislative framework  
This initiative concerns sanctioning regimes for the legislative acts adopted by Council and 
Parliament in the field of financial services, together with the Commission measures based on 
those acts, and in particular legislation addre ssed by the Level 3 Committees in their respective 
studies. The main Directives c oncerned are listed in Annex 1. 
Those acts put in place (in case of regulations) or oblige Member States to put in place (in the 
case of directives) certain rules for the conduct of business by market participants or for the 
taking up and conduct of certain businesses of financial institu tions. For example, those acts 
require Member States to prohibit  certain conducts (see e.g. the Market Abuse Dire ctive), or to 
ensure that financial activities  are not carried out without appr opriate authoris ation and that 
financial institutions authorised under a directive comply with certain requirements at all times (see e.g. the Solvency II Directive). In each of those ca ses, the question of appropriate 
sanctioning arises if a market pa rticipant or financial institution does not comply with an EU 
regulation or with the national provisions en acted by Member States to transpose an EU 
directive.  
The existing legal framework leaves it for the nationa l authorities to detect such violations and to 
apply appropriate sanctions
16. At present, EU legislation deals with neither the type and level of 
sanctions to be applied nor thei r enforcement. Therefore, Memb er States enjoy considerable 
autonomy in terms of choice and application of  national sanctions. However, this autonomy 
should be balanced with the need  for uniform application of Eur opean law. Where EU legislation 
does not specifically provide any penalty for an infringement or refers for that purpose to 
national law, regulations  and administrative provisions, th e principle of sincere cooperation 
                                                                                                                                                             
9  Source: Annual report 2008/2009, p. 33; Annual Report 07/08 P. 23Press releases 
10  Source: Annual report 2008, p. 241 
11 Source: Annual Report 2008, p 210-211 
12  Source: Annual Report 2007, p. 38; Annual Report 2008, p. 40. 
13 Source:  http://www.cbfa.be/f r/sanc/sanc.asp (29 July 2010). 
14 Source: Annual Report 2008, p. 145; Annual Report 2007, p. 133; Annual Report 20006, p. 137. 
15 Source: Annual Report 2008, p. 118); additional information by AU authorities 
16 In its Proposal on amending Regulation (EC) No 1060/2009 on credit rating agencies (COM(2010) 289 
final), the Commission proposes to entrust the Eur opean Securities and Markets Authority (ESMA) with 
the power to take appropriare supe rvisory measures where a credit rati ng agency (CRA) has committed a 
breach of the Regulation, and to request the Commission to impose on a CRA a fine, in some particular 
cases.  
EN 11   EN requires that Member States "take any appropriate measure to ensure fulfilment of the 
obligations arising out of the Treaty or resultin g from the acts of the Institution of the Union" 
(Article 4.3 TEU). The European Court of Justice has gradually specified that this principle 
obliges Member States to ensure the applicati on of "effective, propor tionate and dissuasive" 
sanctions in case of infringement of European rules17. For that purpose, whilst the choice of 
penalties remains within Member States' di scretion, Member States' must ensure that 
infringements of EU law are penalised under conditions, both procedural and substantive, which are analogous to those applicable to infringements of national law of a similar nature and importance and which, in any event, make the pe nalty, effective, proportionate and dissuasive. 
As to the interpretation of this requirement, in ge neral terms, in the light of the case law of the 
Court of Justice of the European  Union, sanctions can be consid ered effective when they are 
capable of ensuring compliance and consequently effective application of EU law. Sanctions 
would be proportionate when they do not go beyond what is necessary for the objectives pursued 
and adequately reflect the gravity of the infringement
18. Finally, sanctions can be considered 
dissuasive when they prevent authors of potential violations from committ ing or from repeating 
those violations. Beyond these broad principles, whic h stem in any event from the case law, it is 
hardly possible to formulate generally applicab le criteria for judging the requirements of 
effectiveness, proportionality and dissuasiveness. This has to be  assessed in the light of the 
nature of different infringements and th e specifics of the sectors concerned.  
In order to ensure that Member States comply with their obligations in the area of financial 
services, the Directives applicable in the fina ncial sector contain stan dard clauses requiring 
Member States to provide that appropriate administrative measures can be taken or administrative sanctions be imposed against the persons responsible where the provisions 
adopted in the implementation of the Directives have not been complied with. In addition, some 
Directives contain rules on: - c ooperation between national authoritie s in charge of the detection 
of infringements and/or the appl ication of sanctions; - powers to be conferred to the competent 
authorities; - administrative sanctions/measures app licable in some specific cases; - possibility to 
publish the sanctions/measures applied in specific cases. 
3.2. Problem definition 
In spite of the rules describe d in the previous subsection, sa nctioning regimes provided for by 
Member States for violations of national laws tr ansposing the legislative acts adopted by Council 
and Parliament in the field of financial services legislation, are divergent and fragmented. The 
information provided in the CESR , CEIOPS and CEBS reports show  a certain divergence across 
national sanctioning regimes which are designed in  a way that does not always ensure sanctions 
are sufficiently effective, proportionate and diss uasive. Furthermore, the information received 
shows a divergence in the level of enforcemen t: the fact that in so me Member States no 
sanctions were applied in a gi ven period could be symptomatic of a weak enforcement of EU 
rules.  
While the nature and degree of the problems identif ied differ to some extent across sectors and 
Directives, the main problem drivers behind th is phenomenon may be summarised as follows.  
                                                
 
17 Judgment of 21 September 1989, Case C-68/88, Commission vs Greece;  Judgement of 13 September 2005, 
Case C-176/03, Commission vs Council, par 48; Judgement of 5 July 2007, Case 430/05, Ntionik et Pikoulas, par 53.  
18 See ECJ judgement of 5 July 2007, Ntionik et Pikoulas, C-430/05, par 53; ECJ judgement of 6 July 2000, . 
Molkereigenossenschaft Wiedergeltingen, C-356/97, par. 35-36. 
EN 12   EN Problem drivers  
Divergences and weaknesses in sanctioning regimes 
The levels of administrative pecuniary sanctions (fines) vary widely across Member States and 
seem too small in some Member States , including for the same type of infringement.  
For instance, as regards the level of administ rative pecuniary sanctions, the maximum levels 
provided for in national legisl ation diverge very widely: 
– Banking sector:19 the maximum amount of fines provide d for in case of a violation is 
unlimited or variable in 5 Member States, more  than 1 million euros in 9 Member States, less 
than 150.000 euros in 7 Member States.  
– Securities sector: among the 18 Member Stat es providing for administrative fines for 
violations of the prohibition of insider deali ng, 4 Member States provide for maximum fines 
of 200 000 euros or less, while only 11 Member St ates provide for fines of 1 million euros or 
higher. In the case of violati ons of the minimum conditions for authorisation of investment 
firms, 15 Member States provide for maximum fines of less than 1 million and in 6 of them the maximum amount is 100 000 euros or less.  
– Insurance sector:
20 6 Member States provide for ma ximum fines of 100 000 euros or less21.  
The fines applied in certain Member States may a ppear to be rather small, for several reasons. 22 
First, violations of financial services legislati on can lead to gains of several million euros, in 
excess of the maximum levels of fines provided for in some Member States.23 However, a fine 
that is lower than the gains that can be expected from the violation for which the fine is imposed is unlikely to have much of a dissuasive effect . Second a potential offender may always hope that 
the infringement will remain undetected by the au thorities. To ensure that a fine has a 
sufficiently dissuasive effect on a rational market operator, the possibility that an infringement 
will remain undetected must be offset by imposi ng fines which are higher than the benefit that 
the undertaking gained from breaching the financ ial services legislation in question. In the 
financial sector, where a larg e number of potential offende rs are cross-border financial 
                                                
 
19 This concerns the range of fines available for violations of banking legislation in general, and does not 
relate to a specific violation. 
20 This concerns the range of fines available for violations of insurance legislation in general, and does not 
relate to a specific violation. 
21 See CEBS report, p. 50-52; CEIOPS report, p. 119-1 23; CESR report on MAD, excerpts from the replies of 
national authorities; CESR report on Mifid, p. 182. 
22 Research on the level of fines and its relation to the le vel of enforcement, as well as on the optimal level of 
fines includes the following: John C. Coffee, Law and the Market: The Impact of  Enforcement, Columbia 
Law and Economics Working Paper No. 304, 2007, p. 13 ssq < 
http://finance.wharton.upenn.edu/weiss/wpapers/07-3 .pdf> (20 September 2010); Uldis Cerpsa Greg 
Mathersb and Anete Pajustec: Securities Laws En forcement in Transition Economies, p. 12 ssq., < 
http://www.cerge-ei.cz/pdf/gdn/R CV_100_paper_01.pdf> (20 September 2010); Rafael La Porta, florencio 
Lopez-de-Silvanes, Andrei Shleifer: What Works in S ecurities Laws?, the Journal of Finance, Vol. LXI, 
No. 1, February 2006; with a specific focus on anothe r area (antitrust) see Wouter Wils, Optimal Antitrust 
fines – theory and practice, World Competition 2006, p. 183, 199 ssq; Peik Granlund: Regulatory choices 
in global financial markets – restoring the role of aggregate utility in the shaping of market supervision, Bank of Finland Research Discussion Papers 1, 2008, p. 13 ssq; CRA International/City of London: 
Assessing the Effectiveness of Enforcement and Regulation, London, April 2009.. 
23 See for example FSA press release No FSA/PN/098/2003 of 25/09/2003. 
EN 13   EN institutions with very considerable turnovers, sa nctions of a few thousand euro do not seem to be 
sufficiently dissuasive.  
Some Member States do not have at their disposal important type s of sanctioning powers for 
certain infringements.  
– For example, in 6 Member States there is no pos sibility to withdraw the authorisation in case 
of violations of the Market Abuse Directiv e. 15 Member States do not provide for the 
disqualification/dismissal of the management and/or supervisory body in cases involving 
market manipulation under this Directive. Those powers may be useful to effectively sanction 
violations, and in general, competent authorities will only be able to im pose a sanction that is 
optimal in terms of effectiveness, proportional ity and dissuasiveness, if they have a wide 
range of different sanctioning powers. Furthe rmore, public warnings and publication of 
sanctions are not foreseen in all national legislations.  
– For example, under the MiFID, 5 Memb er States do not provide for public 
reprimands/warnings and 7 Member States do not provide for the publication of sanctions. 
However, the publication of sanctions may ma ke a significant contribution to general 
prevention, since they act as reminders of th e sanctions applicable to certain types of 
behaviour and show that there is a real dange r that such behaviour will be discovered and 
punished by the authorities. 24 
Divergences also exist as to the type of persons who may be sanctioned.  In some Member States 
sanctions are not applicable to  natural persons (e.g. Insurance) or to le gal persons (e.g. MAD 
pecuniary sanctions).  
– For example, in the banking sector, in one Memb er States sanctions are limited to natural 
persons and in two other Memb er States to legal persons.25 
– In the insurance sector, three competent author ities do not have the power to apply sanctions 
to natural persons, five authorities are able to apply only financial sanctions to natural 
persons, and two authorities are able to apply only non-financial sanctions.26 
Therefore, legal persons and natural persons will most probably be treated in different ways as 
regards a specific violation, depending on the Memb er States where the violation is committed. 
Similarly, the integrity of financial markets will be protected to different degrees across Member 
States. However, competent authorities will be be tter able to choose a sanc tion that is optimal in 
terms of effectiveness, proportiona lity and dissuasiveness if sanc tions are applicab le to natural 
and legal persons. 27 A natural person (e.g. the manager of a bank) who is essentially responsible 
for an infringement would probably not be di scouraged from committing infringements if he 
doesn't risk to be sanctioned fo r his illicit conduct because sancti ons are applied to legal persons 
(e.g. the bank) only. On the other hand, when an in fringement is the res ponsibility of a legal 
person (e.g. a financial institution as a whole), sanctioning the natural persons (e.g. the employees involved in the infringement) only w ould probably not enc ourage such financial 
institution to take the organisational measures a nd provide the staff training necessary to prevent 
infringements. 
                                                
 
24 See references quoted above (Footnote 22). 
25 Source: CEBS report, p. 58 and excerpts from replies of national authorities. 
26 Source: CEIOPS report, p. 108-110. 
27 See references quoted above (Footnot e 22), in particular Granlund, p. 18. 
EN 14   EN The criteria taken into  account to determine the level of the fines  vary substantially (e.g. 
undertaking's own funds, profit derived from the o ffence, loss incurred by third parties etc.).  
– For example, for the violation of insider dealing under the Market Abuse Directive, only 12 
Member States provide for sanctions correspondi ng at least to the benefit derived from the 
offence.28 Of the 4 Member States with the lo west maximum admini strative pecuniary 
sanctions (200 000 euros or less) only 1 provides for sanctions related to the illegal profit 
obtained. A fine that is not considerably higher than the benefit that may be gained from a 
violation could have a li mited dissuasive effect. 29  
– For example, in the banking sector, only 17 Memb er States take into account the financial 
strength30 of a financial institution when determ ining the level of a fine imposed on it. 
However, any penalty imposed needs to have an equivalent effect on all financial services 
undertakings: a fine of a sma ll level, while being clearly dissuasive for certain smaller 
financial institutions, may have only a very limited dissuasive effect for large financial institutions.  
Moreover, divergences exist on the nature (administrative or criminal) of sanctions 
provided for 
in national legislations. For example, while all Member States provide for administrative 
sanctions in case of violations  of the Mifid Directive, only  13 Member States provide for 
criminal sanctions, including criminal fines and/or  custodial penalties. Criminal sanctions send 
out a strong message of disapproval to indi vidual offenders and could therefore have an 
important dissuasive effect. 
Finally, even where appropriate sanctions (both p ecuniary and non-pecuniary) are in place, a 
certain divergence exists in the level of appli cation of sanctions in di fferent Member States.  
The effectiveness, proportionality and dissuas iveness of sanctioning regimes depend not only on 
the sanctions provided for by law but also on thei r application. In additi on to the provision for 
appropriate sanctions in national legislation, it is  key for the effectiveness of sanctioning regimes 
to ensure that sanctions are actually  applied when a violation occur.  
There is no clear indicator that would be able to  measure and compare the level of application of 
sanctions in different Member States. Research  therefore derives some initial evidence on the 
level of application of sanctions in different country from input factors, such as the resources 
dedicated by a country to applic ation of sanctions, or output fact ors such as the number and level 
of sanctions applied.31 In this regard, the data available concerning the number and level of 
sanctions applied gives some evid ence of a certain divergence:32  
– The number of sanctions applied in different Member States in 2007 ranges from 0 to more 
than 100, and divergences also exist in Member  States having banking and insurance sectors 
of similar size.  
                                                 
28 Source: CESR MAD Report, p. 31 and excerpts from replies of national authorities. 
29 See references quoted above (Footnote 22).. 
30 Source: CEBS report, p. 53 and excerpts from replies of national authorities. The financial strength of an 
undertaking may be indicated for example by the level of its own funds, its turnover, or its total assets; 
when an individual is responsible for the violation, his financial strength may be indicated by his annual 
income. Pls note that for the banking sector, the data available concerns does not relate to certain specific types of sanctions. 
31 See references quoted above (Footnote 22), in particular Coffee, p. 13 ssq; CRA International, p. 27-32.  
32 Source: CEBS report, p. 55; CEIOPS report, p. 26, 127; see also Chart in section 2.1.1 above. 
EN 15   EN – Some Member States have not applied a ny sanction for more than two years.  
Numbers of applied sanctions can be low either because there have not been any violations, or 
because violations are not detected, or cannot be proven. While the total absence of violations in 
some Member States cannot be ru led out as a possibility, it appear s more likely that violations 
are not detected,  considering th at some of these Member States  have a financial sector of a 
certain importance and that othe r Member States having financial markets of similar size applied 
several sanctions in the same reference period. In  an integrated financial market, economic and 
cultural differences alone cannot  explain such divergences. 
As the effectiveness and dissuasive effect of sanctions depend at least partly on them being seen 
to be applied by the competent authorities, providing for appr opriate types a nd levels of 
sanctions would be insufficient if violations ar e not detected and therefore sanctions are not 
applied. Deficiencies in detection of violatio ns can lead to the same problems of lack of 
compliance with EU law, undermined protection of  consumers and market integrity, and lack of 
confidence in the financial sector described above.  
While the application of sanctions for violations of EU financial services legislation is the 
responsibility of national authoritie s, an insufficient application is an integral part of the problem 
addressed and should therefore be taken into considerati on, with full regard to the limited scope 
for EU action on this matter.33 
 
Consequences of the problem drivers / Specific problems  
The divergences between sanctioning regimes and the weaknesses of the sanctioning regimes 
described in the previous secti on may render the sanctions for bre aches of EU financial services 
legislation insufficiently effective, proportionate and dissuasive . These divergences and 
weaknesses may also create distortions of competition in the Internal Market , which may be 
detrimental to the protection of investors and c onsumers of financial serv ices products alike. 
Unequal treatment of violations in different Memb er States may result in different costs for the 
undertakings engaged in financial services activities, which risks creating competitive 
disadvantages for undertakings from certain Memb er States and prevents the development of a 
level playing field within the In ternal Market. In extreme circum stances, undertakings seeking to 
circumvent financial services legislation might seek to esta blish their opera tions in those 
Member States with the least stringent sanctioni ng regimes. This could result in relaxed business 
practices which may undermine market integrit y and consumers protection. Further, financial 
institutions with cross-border operations could seek to explo it the differences between the 
legislation in force in different Member States. This is particularly relevant in view of the 
integrated nature of EU financial markets, many of which are dominated by cross-border groups 
(see section 3.1.1 above). 
For example:  An investment company based in Memb er State A under the MiFID regime is 
subject to fines of no more than EUR 12 500 for br eaches of that regime, wh ereas a subsidiary of 
the same company based in Member State B unde r the same regime may be subject to fines 
exceeding EUR 1 500 000.  
                                                 
33 See section 5.1 below. 
EN 16   EN Those divergences and weaknesses of sanctioning regimes can also have a negative impact on 
the trust between national supervisors and hence on cross border financial supervision .  
The crisis exposed, in particular, serious failin gs in the cooperation, coordination, consistency 
and trust among national supervisor s. In today's European fina ncial markets, in which many 
financial firms operate on a cross-border basis, the effectiveness of cross-border supervision 
must be ensured. This requires cooperation, coordination and trus t between national supervisors, 
something that cannot be realised  where there are varying sancti oning regimes. To this end, a 
new European supervisory architecture has been set up, to upgrad e the quality and the 
consistency of national supervis ion and strengthen the oversight of cross border groups through 
the setting up of supervisory colleges. However, a supervisory authority could be unwilling to delegate powers to an authority  in another Member States in which the sanctioning regime is 
considerably weaker. If national supervisors are not equipped with equivalent and consistent 
powers, including sanctioning powers, there is a risk  that the decisions agreed within a college 
will not be applied in a consistent way by the supervisors concerned. This is particularly relevant in view of the importance of cross-border gr oups in EU financial markets (see section 3.1.1 
above). 
For example
: If, in a college of supervisors34, the authorities of Member States A, B and C 
agreed to replace the managers of a bank at centr al and subsidiary level because of failures at 
both levels, the authority of Member State A would apply the measure without difficulty, the 
authority of Member State B would need the c ooperation of other nationa l authorities and the 
authority of Member State C would be unable to do anything, because it lacks the necessary 
power.  
Where supervision is faced with divergent stan dards in both the level and type of sanctions 
available, loopholes can appear through whic h infringing parties ma y manage to avoid 
appropriate penalties fo r illegal behaviour.  
General problems  
The specific problems identified in th e previous section can result in a lack of compliance with 
EU financial services rules , such as prudential rules, conduct of business obligations, 
transparency obligations, etc. 
For example, when the maximum amount of the p ecuniary sanctions is very low, even for the 
most serious infringements, there is a high ri sk that sanctions will not have a sufficiently 
dissuasive effect, as the perceived reward from such behaviour will far outweigh the real risk.  
For example : in the banking sector, when an infri ngement of banking law and money laundering 
occurs in some Member States, the competent authorities will apply fines of less than EUR 
150.000, which are very unlikely to have a dissuasive effect on the large banking groups operating in these Member States.  
Similarly, when the level of sanctions does not depend on the benefit resulting from the offence, 
it is very likely that they will not discourage further offences. Furthermore, even where sanctions are linked to the benefit from the offence, this  can be very difficult to quantify or calculate 
                                                
 
34 The college of supervisors is the forum in which a ll national authorities supervising a specific cross-border 
financial institution coordinate their activities  
EN 17   EN accurately. Thus the risk remains that sanctions will not consistently respect the seriousness of 
some violations.  
For example:  in some Member States the fines for insider dealing are limited to EUR 200 000, 
while the profits derived from such violations have in some recent cases amounted to several 
millions of Euros.  
Divergences and weaknesses of sanctioning regimes may therefore deprive EU financial services 
rules of their effectiveness: it can increase the risk of ma rket manipulation and lack of 
transparency and may lead financial institutions to take excessive risks in their activity, and can 
ultimately be detrimental to the proper functioning of financial markets.  
This situation risks seriously undermining consumer protection and market integrity . But 
improper functioning of financial markets deriving from lack of compliance with EU financial 
services rules can also negatively affect the whole economy. Violations of these rules may 
indeed cause serious economic damages to a broad range of users of fina ncial services and to 
financial market safety and integrity, which have  in turn serious negative repercussions on the 
whole economy.  
This situation also risks undermining confidence in the financial sector , where consumers note 
that illegal behaviour is not met with appropria te sanctions which are capable of discouraging 
further infringements.  
For example : if consumers have the impression that fi nancial institutions violating the laws 
protecting them against unsuitable investment a dvice or against improper use of money invested 
in funds do not have to fear deterrent sanctions, th eir reluctance to make efficient use of financial 
market opportunities – already severely hit by the fi nancial crisis - may be further exacerbated. If 
consumers will be reluctant to shop around Europe if they feel that the level of protection of 
consumers and market integrity is significan tly different in different Member States.  
3.2.1.  Affected stakeholders  
EU action aiming at approximating and reinforci ng sanctioning regimes in the financial sector 
will affect all market players:  
– financial institutions, including their stakeholders (t he extent to which financial institutions of 
different nature and size would be affected w ould depend on the specific violations for which 
sanctions are applied); 
– users of financial services, in cluding depositors, investors, po licy-holders, pensioners and non 
financial companies;  
– public authorities, including centr al banks, supervisors and other national authorities in charge 
of the application of sanctions. 
3.2.2.  Baseline scenario 
The baseline scenario would be one in which no  action is taken in this field by the Commission 
at this point. The EU would continue to build  on the existing legal framework and continue to 
rely on the national sanctioning regimes, which ar e divergent both in subs tance and application, 
and are sometimes not sufficiently dissuasive.  
EN 18   EN General clauses on sanctions already contained in sectoral Directives w ould be maintained and 
similar clauses would be included in future legislative proposals put forward by the Commission 
in the financial services sect or. The Commission proposal for a regulation on over-the-counter 
(OTC) derivatives, central counter parties and trade repositories35 envisages also the introduction 
of a provision requiring that sanctions sha ll include at least administrative fines.  
Member States would be therefor e obliged to ensure that sanctio ns are effective, proportionate 
and dissuasive, but they would be free to decide how to achieve this result. As "guardian of the 
Treaties", the Commission would verify that Member States implement correctly the rules on sanctions already contained in th e sectoral Directive. In case it believes na tional sanctioning 
regimes to be incompatible with these general rules, the Commission would have the possibility of commencing infringement proceedings agai nst Member States under Article 258 of the 
TFEU
36, asking them to take the measures necessary to  ensure correct application of the EU law. 
However, the existing EU rules on sanctions being very general37, those rules leave a certain 
margin of discretion to Member States, and in fringement proceedings would probably only be 
successful in cases such as those where Member States do not provide a ny sanctions at all for 
certain violations. In other cases, it would be very difficult for the Commission to gather the 
evidence necessary to prove that  national regimes are not effectiv e, proportionate and dissuasive. 
Indeed, in the context of such an action, it is for the Commission to provide the Court of Justice 
with all the evidence needed to enable it to es tablish that a Member State fails to fulfil the 
obligations deriving from EU law, and in so doing the Commission may not rely on any 
presumption. Within this scenario, national au thorities in different Member States would 
continue to have different sa nctioning powers and the same infringements to European rules 
would be dealt with in a different way across the EU. Member  States with st rong sanctioning 
regimes could be reluctant to fully trust thos e with weaker sanctioning regimes, making it 
difficult to ensure effective cross border s upervision. The Commission would continuously 
monitor the functioning of sanc tioning regimes and would assess the need for policy action at 
later stage.  
The baseline scenario ta kes into account that the existing coordination work of the Level 3 
committees will be further enhanced with th e creation of the new European Supervisory 
Authorities. Already today, CESR has establis hed a Standing Committee (CESR-Pol) which has 
responsibility for CESR work related to co- operation and coordination of surveillance and 
enforcement activities between na tional supervisors. Once crea ted, the new Authorities would 
continue such work and could play an important  role in increasing the coherence and monitoring 
the application of sanctions. The new Authorities will have powers to play  an active role in 
building a common supervisory culture . In particular, they can carry  out peer reviews of national 
authorities including sanctioning powers, and will receive information about sanctions applied 
by national authorities. Those powers can be used in order to mon itor national legislation and to 
promote exchange of information and best pract ices between Member States. Moreover, they 
have the power to settle disagr eements between national authoritie s, in some areas that require 
                                                 
35 COM(2010) 484. 
36 Article 258 provides that the Commission may take action against a Member State for failing to fulfil an 
obligation under the Treaties. In pa rticular, the Commission may formally request the Member State to 
bring the infringement of EU law to an end, and if the MS does not take appropriate correct measures 
necessary, it can refer the case to the European Court of Justice.  
37 The standard clauses contained in the sectoral Di rectives require Member States: - to provide that 
appropriate administrative measures  can be taken or administrative sanctions be imposed against the 
persons responsible where the provisions adopted in the implementation of the Directives have not been 
complied with, and – to ensure that these measures are effective, proportionate and dissuasive. 
EN 19   EN cooperation, coordination or joint decision-maki ng by supervisory authorit ies from more than 
one Member State. Those possibilities will exist regardless of any additional policy action by the EU. 
The European Securities and Markets Authorit y (ESMA) would probab ly be empowered to 
adopt supervisory measures where a credit rating agency has committed a breach of the 
Regulation, as envisaged in the proposal tabl ed by the Commission for the revision of the 
regulation on credit rating agencies (CRA Regulation)
38.  
In the baseline scenario no clear and consistent  guidance is provided to Member States on the 
type and the level of sanctions to be applied to certain violations. Therefore, it is very likely that 
national sanctioning regimes would not reach a de gree of approximation en suring that sanctions 
are always dissuasive and effectively enforced.  
In the baseline scenario, financial institutions wi ll also be subject to reputational damage linked 
to a violation that becomes pub lic. This supposes th at the public is awar e of the sanctions 
imposed, which is not the case where information a bout violations or sanctions is not published. 
Moreover, the reputational damage depends also on the level of fines imposed: very low fines 
may be associated to minor violations which ar e unlikely to seriously undermine the reputation 
of their perpetrator.  
In the baseline scenario, financial institutions will al so be subject to civil liability for violations 
in accordance with national law. However, its deterr ent effect is limited as  it does not cover all 
possible violations of EU financia l services rules: civi l action cannot be alwa ys taken against the 
perpetrator/s of the violation and/or the dama ges caused by the violation can often not be 
quantified (e.g. a violation of capital adequacy or reporting requirements by a financial 
institution – a severe violation of  the relevant directives – does not always lead to any actual 
damage until an institution finds itself in severe difficulties as a result). In any case, the purpose of civil actions is to compensate damages incurr ed by third parties, which would probably not be 
deterrent in cases where the profit derived from the violation is higher than the damages to be 
compensated.  
At the international level, the EU would continue  to push for rigorous en forcement of financial 
regulations in order to get more effective, propo rtionate and dissuasive sanctions, but the lack of 
common standards at EU level would make it difficult to propose concrete measures to be 
adopted at international level.  Lack of European common standards would weaken the EU 
credibility at international level. 
                                                
 
38 See footnote 16. 
EN 20   EN Problem tree * 
Problems drivers    Specific problems  General problems 
* The grey parts of the problem tree refer to problems ma inly relating to divergences in sanctioning regimes while 
the white parts refer those mainly relating to weaknesses  
3.3. The EU's right to act and justification  
EU legislation on financial servi ces is based on the Treaty provisi ons on the establishment of the 
Internal Market, particularly those aiming at en suring the freedom of establishment (article 49 
TFEU) which enables an economic operator to ca rry on an economic activ ity in a stable and 
continuous way in one or more Me mber States, and the freedom to provide services (article 56), 
which enables an economic operator providing services in one Member State to offer services on 
a temporary basis in another Member State. Lack of compliance with 
EU rules (prudential rules, 
conduct of business 
obligations) 
 
 
Leading to 
Improper functioning of 
financial markets in the 
Internal Market 
• Risk to financial 
stability, eg. 
excessive risk taking 
• Risk of consumer 
detriment  
• Risk to market 
integrity (e.g market 
manipulation) 
• Undermined 
confidence in the 
financial sector  Unlevel playing 
field 
 Lack of 
dissuasiveness, 
effectiveness and 
proportionality of 
sanctions  
 
No trust between 
national 
supervisors => 
Ineffective 
supervision Weaknesses and divergences in 
sanctioning regimes, relating to: 
1. Type and level of administrative sanctions 
• Low level of fines 
• Lack of certain sanctioning powers 
 
2. Addressee of administrative sanctions 
• Not always applicable to both natural and legal 
persons responsible 
3. Factors taken into acc ount when determining the 
administrative sanctions 
• Sanctions not linked to relevant criteria 
 
4.  Criminal sanctions 
• Criminal sanctions not foreseen 
 
 
5. Application/enforcement of sanctions 
• No incentives to report misconducts => 
insufficient detection of violation • Considerably different type and level of sanctions 
• Different criteria for application of sanctions 
• Different level of application of sanctions • Divergence in the application of criminal 
sanctions 
EN 21   EN The overall objective of the financial services legisla tion is to create integrated, open, 
competitive, and economically efficient European financial market, where financial services can circulate freely at the lowest pos sible cost throughout the EU, with  adequate and effective levels 
of prudential control, financial stability and a high level of consumer protection. 
The corollary of an integrated fi nancial services market  is that the same unlawful conduct incurs 
similar sanctions wherever the infringement is committed in the European Union. Such sanctions 
should be sufficiently dissuasive in order to discourage future wrongdoings. In this way, the EU 
would put out a strong message that certain conducts are unacceptable and punishable on an 
equivalent basis, which would in crease confidence in the financial sector. This requires some 
convergence in sanctioning regimes across the EU.   
The legal bases for EU level action in this spec ific field are: Article s 53, para. 1 and 62 TFUE, 
which provide the EU legislature with the possib ility of adopting directives for the coordination 
of the provisions concer ning the taking-up and pursuit of activ ities as self-employed persons and 
the provision of services in th e Internal Market, and Article 114 TFEU on the approximation of 
laws, according to which the European legislator  can adopt "measures for the approximation of 
the provisions laid down by law,  regulation or administrative action in Member States which 
have as their object the establishment and the f unctioning of the Internal Market." The object of 
measures adopted on the basis of Article 114 TFEU  must genuinely be to improve the conditions 
for the establishment and functioning of the internal market.
39 
The European legislature therefore has discretion  as to the method of approximation which is the 
most appropriate in order to im prove the conditions for the esta blishment and proper functioning 
of the Internal Market40. This may include the approximati on of national laws concerning the 
type and level of administrativ e sanctions to be imposed.  
Article 83 TFEU also provides a legal basis for the establishment of minimum rules concerning 
the definition of criminal offe nces and sanctions, when the a pproximation of criminal laws 
proves essential to ensure the effective implemen tation of a Union policy in an area which has 
been subject to harmonisation measures.  
3.3.1.  Subsidiarity principle  
Convergence of national sanctioning regimes seems necessary to promote dissuasiveness thereby 
ensuring a level playing field, a uni form application of EU financia l services legislation, and full 
cooperation and mutual trust between national supervisors across the EU. These objectives 
cannot be sufficiently achieved by the Member States alone.  
Better application of the existing sanctioning pow ers by competent authorities at national level 
could increase the effectiveness of sanctioni ng regimes but such an improvement of the 
application would not be suffici ent to approximate the sanctio ning powers provided for in 
national legislation, which seems necessary to ensu re that all national aut horities have at their 
disposal comparable sanctioning powers. 
                                                 
39 Case C-58/08 Vodafone and Others v. Secretary of State for Business, Enterprise and Regulatory Reform  
Judgment of the Court 8 June 2010. 
40 In United Kingdom v Parliament and Council , that by using the expression ‘measures for the 
approximation’ in Article 95 EC (now Article 114 TF EU) the authors of the Treat y intended to confer on 
the EU legislature a discretion as regards the method of approximation most appropriate for achieving the 
desired result, in particular in fields with complex technical features. Case C-217/04 United Kingdom v 
Parliament and Council  [2006] ECR I-3771 
EN 22   EN In order to ensure that violat ions of financial services legi slation are adequately sanctioned 
across the EU, and supervisors can develop mutual  trust that each of their counterparts has 
appropriate sanctioning powers at its disposal, it must be ensured that sanctioning powers 
available in every single Member  State adhere to a common mi nimum standard. That can only 
be achieved by EU action. 
EU action is therefore needed to achieve sufficient convergence. The objectives of the 
Communication can therefore be better achieved through EU acti on rather than by different 
national initiatives. 
The communication will put forwar d proposals to approximate the Member States' legislations 
on sanctions in the financial se ctor, based on common principles  to be applied consistently 
across the European Union. This appears partic ularly important when considering that EU 
financial markets are increasingly integrat ed, especially at the wholesale level41.  
Any future legislative initiative in this fiel d will be accompanied by new impact assessments 
analysing the need for the measur es proposed and their impacts. 
3.3.2.  Proportionality  
Actions proposed in the communication will not go beyond what is nece ssary to achieve the 
objective of reducing divergences in national sa nctioning regimes and reinforcing sanctions to 
the extent this is necessary to ensure effective application of EU legislation.  
The existing divergences between sanctioning re gimes partly reflect the specificities of the 
different national legal systems and traditions, At the same time, the objective of a sufficiently effective, proportionate, and dissuasive sanctioning regimes, as established by the EU legislative 
acts in the field of financial services, is shared  by all Member States. Such specificities do not 
justify a significantly different tr eatment of violations of EU fina ncial services rules in different 
parts of the Internal Market.  
The measures suggested in the communication will promote further convergence while ensuring 
respect for different national lega l systems and traditions . Changes in national legislation will be 
necessary only where the existing rules do not comply with some basic standards of an efficient 
sanctioning regime. Similarly, Member States will be obliged to put in place new administrative 
procedures only to the extent these basic stan dards so require.As to the regional and local 
dimension of the action envisaged, it is worth noting that the issues relating to sanctions in the 
area of financial services are in most cases enshrined in nati onal legislation and applied by 
competent authorities at national le vel. At this stage, no specifi c implications of the envisaged 
actions for certain regions or localities can be identified.  
3.3.3.  Fundamental Rights  
Possible impacts on relevant fundamental rights  will have to be cons idered in any proposals 
to approximate Member States' legislation on sanctioning regimes in the financial sector. 
The following fundamental rights of the Charte r of Fundamental Rights are of particular 
relevance: 
                                                
 
41 See EFIR 2009, footnote 3 above. 
EN 23   EN • Equality before the law (Art. 20) 
• Non-discrimination (Art. 21) 
• The fundamental rights provided for in Title VI Ju stice: right to an effective remedy and to a 
fair trial (Art. 47); pr esumption of innocence and right of  defence (Art.48), principles of 
legality and proportionality of criminal offences and penalties (Art. 49), ri ght not to be tried or 
punished twice for the same offence (Art.50) 
Greater convergence achieved through the approx imation of sanctioning regimes will ensure non 
discrimination and equal treatment of the authors of  the violations as between Member States. In 
particular, the measures proposed in this respect w ill better ensure that comparable violations are 
not dealt with differently and different violations are not dealt with alike, unless such differences 
are objectively justified. When dealing with the reinforcement of sanctions  particular attention 
will be paid to proportionality issues. More severe  sanctions will be proposed only to the extent 
the existing ones are not appropriate to attain th e objective pursued by the rules which have been 
breached.  
4. OBJECTIVES  
EU action on the approximation and reinforcemen t of sanctioning regimes could satisfy several 
mutually complementary objectives. It could benef it supervisors and other national authorities in 
charge of the application of sanctions: they w ould have more appropriate instruments to deal 
with the infringements, which would help in preventing future breaches of EU law. More convergent sanctioning regimes could also raise mu tual trust between supervisors and ease the 
implementation of their decisions. More eff ective supervision and better prevention of 
infringements would be beneficial  to the whole financia l system, in terms of consumer protection 
and safety, stability and integrity of financial markets.  
The general policy objectives of this exercise are the following:  
• Restored confidence in the financial sector  
• Better protection of users of financial services. 
• Safety, stability and integrity of financial markets 
• Compliance with EU financial rules contributin g to a proper functioning of financial markets 
To achieve these general objectives, the following  specific objectives must also be ensured: 
• The effectiveness, proportionality  and dissuasiveness of sanctions; 
• The development of a level playing field wh ich reduces the opportun ities for regulatory 
arbitrage; 
• The effective supervision of financial services providers. 
The specific objectives listed above require the attainment of the following operational 
objectives: 
EN 24   EN • Reinforcement of sanctioning regimes 
• Approximation of sanctioning regimes 
5. POLICY OPTIONS , IMPACT ANALYSIS AND COMPARISON  
For the purposes of this impact assessment, the analysis is at this stage limited to a general 
assessment of the possible options, aimed at ap proximating and reinforcing national sanctioning 
regimes. Policy options considered do not deal w ith specific measures needed in the three main 
sectors concerned (banking, insurance, securities), which will be assessed at the later stage when 
the Commission makes firm proposals. Policy opti ons have been identified on the basis of both 
the content (issues covered) and the nature (leg ally binding or not) of the measures proposed. 
The latter aspect is relevant in the context of th is analysis, given that the legal nature of the 
measures proposed is likely to have  a significant impact on the degr ee to which the objectives of 
approximating and reinforcing national regimes can be achieved, but also because it will be 
perceived by Member States - key stakeholders in the context of this initiative – as determining 
to a large extent the impact a ny measure proposed is likely to have on them. The analysis covers 
the main policy issues identified on the basi s of the available info rmation, which does not 
exclude that additional issues could be identified following th e consultation of stakeholders 
launched with the Communication, and addresse d in the future Commission's proposals. 
In order to assess and compare th e policy options, an analysis of  their main impacts has been 
carried out against criteria deri ving from the problems identified in  the current situation and the 
operational objectives of this proposal. The analysis  takes also into account the different impact 
on the stakeholders con cerned and the issues relating to proportionality, subsidiary and the 
impact on fundamental rights of each option. Th e options are compared with regard to the 
criteria of effectiveness and efficiency  according to the following definitions: 
Effectiveness : the extent to which options achie ve the objectives of the proposal; 
Efficiency : the extent to which objectiv es can be achieved for a give n level of resources/at least 
cost.  
The following schema is used to compare the contribution of the different options to the 
achievement of the objectives: √√ (strong positive) √ (positive), 0 (neutral). 
In view of the limits of the data available and the nature of the subject-matter, no attempt has 
been made to quantify the impacts of each option. By definition, it is very difficult to estimate 
the number of undetected violations and therefore quantify their poten tial impact. The analysis is 
therefore of qualitative nature. 
5.1. Policy options relating to the content of the measures 
This section explains the main issues to be a ddressed in order to achieve the objectives of 
approximating and reinforcing national sanctioning re gimes. In view of the problem as defined 
in section 3.2 above, we have identified the following issues for potential EU action:  
EN 25   EN – EU action concerning the type of admini strative sanction and level of pecuniary 
administrative sanctions; 
– EU action concerning th e addressees of administrative sanctions; 
– EU action concerning the fact ors taken into account when determining the sanctions; 
– EU action concerning criminal sanctions; 
– EU action to support effectiv e application of sanctions. 
For each issue, different policy options have been an alysed as to the content of the measures that 
may be taken to this purpose. Finally, those opti ons have been compared and a set of preferred 
policy options identified. 
ISSUE 1: Type of administra tive sanction and level of  pecuniary administrative 
sanctions  
This issue addresses the type of  administrative sanctions appli cable in the different Member 
States for violations of EU financial services rules, including the public ation of sanctions, which 
can be considered itself a (com plementary) sanction. As to the p ecuniary sanctions in particular, 
this issue concerns the minimum and maximum le vel of such sanctions foreseen in national 
legislations. 
Options Description 
1: no EU action Member States are obliged only to ensu re that their legislation on type of administrative 
sanctions and level of pecuniary sanctions complies with the general obligation to guarantee 
"effectiveness, proportionality and dissuasiveness of sanctions" already contained in sectoral 
Directives.  
Member States maintain their legislation unchanged insofar they consider type and level of 
sanctions envisaged are sufficiently effective, proportionate and dissuasive. 
2: minimum common 
provisions on type 
of administrative sanctions and level 
of pecuniary 
sanctions for key 
violations Some common provisions on the type of sanctions that should be available to the competent 
authorities in all Member States for certain key violations. (For instance, common provision 
that withdrawal of authorisations should be available in case of recurrent violation of key 
provisions of the EU Directives, that the publi cation of sanctions should be always envisaged, 
that cease and desist orders could be issued to stop un authorised activities, that 
dismissal/disqualification of managers should be available in case of serious wrongdoings in 
the management) 
Common minimum provisions to ensure that level of pecuniary sanctions for certain key 
violations or categories violations is sufficiently high to ensure dissuasiveness (e.g. that the maximum level significantly exceeds the benefit de rived from the infringement, if this can be 
calculated or estimated, and that a minimum level is provided for very serious violations 
which reflects the seriousness of the violation). Member States could set those levels at the 
level determined by the EU or higher, or co uld provide for an unlimited maximum level. 
Would lead to an increased convergence of sanctioning regimes while preserving some 
Member States discretion on the type and level of sanctions applicable to violations of EU financial services legislation.  
3: uniform type of 
administrative 
sanctions and level of pecuniary 
sanctions for key Key violations would be treated in a uniform way across Europe 
The same type of sanctions and level (minimum and maximum) of pecuniary sanctions would 
be provided for in all national legislations for violations of key provisions of the EU Directives. Member States would not be allowed to stipulate different types of sanctions or 
EN 26   EN violations different levels of fines applicable to those violations while they would maintain their 
discretion in deciding sanctions applicable to other violations. 
4: uniform type of 
administrative 
sanctions and level of pecuniary 
sanctions across 
EU for all violations 
 All Member States provide for the same type of sanctions and level of pecuniary sanctions in 
their national legislations. Each violation of EU financial services would be dealt with in a 
uniform way wherever it was committed.  
Uniform provisions would regulate the types of administrative sanctions applicable for 
violation of each specific rule of the financia l services Directives. For pecuniary sanctions, 
fixed minimum and maximum level.. 
• Policy option 1: no EU action 
In the absence of any action at EU level, Memb er States would hardly  be willing to compare 
type of sanctions and level of pecuniary sanctions they envisage  with those envisaged in other 
Member States, and to question the effectiveness of their own regime. This implies that type and level of sanctions would probably remain dive rgent and not always optimal in terms of 
dissuasiveness. The Commission could verify whet her national provisions on type and level of 
sanctions comply with the general clause contained in th e sectoral Directives which requires that 
sanctions are effective, proporti onate and dissuasive. However, it would be extremely difficult 
for the Commission to initiate infringement procedures against Member States on that basis, given that the infringement of such general clauses would be very difficult to prove.  
The new ESAs would also monitor the functioning of national sanctioning regimes and would 
have the possibility to address breaches of EU law. They could actively promote further 
convergence by guidelines and recommendations.  
• Policy option 2: minimum common provisions on type of administrative sanctions and 
level of pecuniary administrative sanctions  
As regards option 2, applying mini mum common criteria w ould help in ensuring that violations 
of financial services legislation are dealt with in a similar way in all Member States. This reinforces the development of a level playing fiel d in European financial services markets, as 
undertakings would risk incurring  similar – even if not identical - sanctions and therefore bear 
similar costs
42 wherever they breach fina ncial services legislation. K nowing that the response to 
violations of financial services rules is broadly equivalent thr oughout the EU would also increase 
consumer confidence and may lead to more cross border selling of financ ial services products, 
reducing the fragmentation of the single market al ong national lines. Further, the application of 
minimum common criteria will help improve cro ss-border supervision,  by ensuring that all 
competent national authorities have equivalent  minimum sanctioning powers, at least for key 
breaches of financial se rvices legislation.  
This option would increase the dissuasive effect of  sanctions at least in all Member States which 
currently have levels of sanctions  which are too low. Ensuring that  the level of fi nes envisaged in 
national legislations cannot be lower than the level determined by the EU would  allow for the 
imposition of fines that are op timal in terms of dissuasive ness and proportionality and 
consequently reduce risks of vi olations of EU legislation.43 A higher level of sa nctions signals in 
                                                 
42 This term would be broadly defined as to include all potential negative consequences. 
43 See references above (Footnote 22). 
EN 27   EN fact to any potential author of a violation that this viol ation is considered by  public authorities as 
highly damaging. Moreover, it reduces  the likelihood that the author can expect to benefit from 
the violation. In fact, the amount of sanctions impos ed is considered in academic literature as an 
intermediate indicator for the level of enforcement in certain jurisdictions.44 This would have a 
significant positive impact on consumers protection (e.g. increased compliance with conduct of business rules), on competition between financial institutions (e.g. removing the competitive advantages derived from violations  of financial services legislation), and to safety and integrity 
of financial markets (e.g. fewer cases of mark et abuse/manipulation, increased compliance with 
prudential rules). At the same time it would no t prevent Member States to go beyond the EU 
minimum criteria, and fine other vi olations, provide for higher levels  of fines or for further types 
of sanctions.  
Concerning the impact on Member States, th is option would require changes in national 
legislations in certain Member  States, while other Member States would make no changes or 
only minimal changes. Types and level of sanctions provided for in national legi slations should 
be revised only to the extent this is necessary to comply with the minimum standards, which is 
possibly not even the case in all Member States. Therefore, compliance costs for Member States 
are expected to be limited. Moreover, the discre tion that Member States would maintain in 
defining type and level of sancti ons, would allow them to provide for sanctions which best fit 
their different legal systems and traditions. 
• Policy option 3: uniform type and level of administrative sanction s for key violations 
Option 3 would ensure that identical sanctions are provided for in all Member States at least for 
violations of the most importa nt provisions of the EU Direc tives. This would assist the 
development of a level playing field in the Eur opean financial market by reducing  the potential 
advantage that financial institutions may derive  from differing national regimes. This option 
could also increase consumer confidence and mutual trust between supervisors, leading to more efficient cross-border supervision.  
Similarly to option 2, this option could incr ease the deterrent effect of sanctions and 
consequently reduce risks of violations of EU  law, which would have a significant positive 
impact on consumer protection, competition, safety and integrity of financial markets. However, 
the fact that Member States would not be able to  provide for further type s of sanctions or higher 
levels of fines than those provided for in th e uniform EU framework could weaken the overall 
deterrence of some national regimes.  
This option would probably require significant cha nges in all national legislations in order to 
make uniform types and levels of sanctions for key violations of EU ru les and would eliminate 
any flexibility in dealing with such violations. Therefore, compliance cost s could be higher than 
in Option 2 and the uniform regime might not su it all national legal systems and cultures. For 
instance, Member States would be obliged to cha nge the levels of pecuni ary sanctions applicable 
to those violations, even where they are only s lightly different from the harmonised levels, and 
they would no longer be allowed to provide for t ypes of sanctions different from the harmonised 
ones (e.g. for violations of additional requirement s which are allowed - but not required for all 
Member States – under EU Directives). Some of  them would also have to provide for the 
application of new types of sanctions.  
                                                
 
44 See references quoted above (Footnote 22), in particular CRA International, p. 31; John C Coffee, p. 13 
ssq.  
EN 28   EN • Policy option 4: uniform type and level of administrative sanctions across EU 
Option 4 would eliminate any diverg ence as to the types and levels of sanctions applicable to all 
violations of EU rules, not just key ones, whic h would therefore have th e effect of harmonising 
all sanctions in all Member States. As with Opti on 2, his would ensure a level playing field in the 
European financial market: financial institutions  would not take any ad vantage from different 
national regimes. Again, this could also signifi cantly increase consumer  confidence and mutual 
trust between supervisors leading to mo re efficient cross-border supervision.  
Similarly to options 2 and 3, this option would in crease the deterrent effect of sanctions and 
consequently reduce risks of violations of EU  law, which would have a significant positive 
impact on consumer protection, competition, safe ty and integrity of financial markets.  
This option would have a huge impact on Member St ates, even greater than that of Option 3 as 
more infringements would be covered: it woul d probably require major changes in all national 
legislations in order to make uni form types and level of sanctions. Similarly to Option 3,  levels 
of sanctions would have to be m odified in almost all Member Stat es,  types of sanctions different 
from the common ones would not be allowed any more and some Member State would have to 
provide for the application of ne w types of sanctions. But under this Option such changes would 
have to be made for all violati ons of EU financial rules. This  could require the overall legal 
system to be revised, new procedures to be pu t in place and institutiona l architecture to be 
adapted. Therefore, compliance costs could be si gnificant and the uniform regime could not fit 
national legal system and cultur e in different Member States. Uniform types and levels of 
sanctions could also jeopardise the dissuasiveness of sanctions in some cases. For example, 
Member States would not be able to sanction certain violations th at may not be provided for in 
the uniform EU framework, even if specific nati onal circumstances (e.g. additional requirements 
which are allowed - but not required for all Memb er States – under EU Directives) would require 
such sanctions.  
Comparison of options 
The objectives outlined in sec tion 4 cannot be achieved under option 1, which preserves the 
"status quo" and thus the problems identified in section 3.2. Although the ESAs could promote 
further convergence on the types and level of sanctions, this act ion would hardly be effective 
without an EU framework being in place. Option 4 would be th e most effective in terms of 
ensuring level playing field and better cross-borde r supervision, as it eliminates any divergence 
in types and level of sanctions. The effectivene ss of Option 3 would be slightly lower because 
divergences would persist for certain "non-key" violations. Option 2 woul d be less effective in 
this regard but it would permit to better adapt sa nctions to the specificities of the different 
national legal systems. As to consumer conf idence and protection, the difference in the 
effectiveness of options 2, 3 and 4 is minor: they can be considered equally effective as far as 
appropriate minimum standards are set, that will be perceived as being sufficient to ensure that 
violations are adequately punished  on an equivalent basis.  
Options 2, 3 and 4 are considered to be similarl y effective in terms of ensuring deterrence: 
uniform types and level of sanctions are not nece ssarily more dissuasive than different sanctions 
complying with minimum standards which are sufficiently strict. Mo reover, Option 2 (and 
Option 3 but only for less important violations) w ould allow for the provision of additional types 
of sanctions and higher level of fi nes, which can increase dissuasive ness in some Member States.  
EN 29   EN Regarding efficiency, Option 2 s eems more efficient than option 3 and 4 as it leads to lower 
compliance costs for Member States.  
Effectiveness in achieving the objectives below  
Improve dissuasiveness 
of sanctions Develop level 
playing field Improve trust between 
supervisors Efficiency in achieving 
all objectives 
1. Do nothing 0 0 0 0 
2. minimum common criteria for key violations √√ √ √ √ √ 
3. uniform type and level 
for key violations √ √√ √√ √ 
3. uniform type and level 
for all violations √ √ √ √ √ √ 
ISSUE 2: Addressees of administrative sanctions  
This issue deals with the possibility to apply sanc tions to natural persons (individuals) and/or to 
legal persons (financial institutions) responsibl e for a violation of EU  financial services 
legislation. The following options do  not envisage the possibility that all sanctions are applicable 
to natural persons only or to legal persons only, as there are no reasons justifying such a restriction of the personal scope of sanctions.  
Options Description 
1: no EU action In some Member States certain sanctions would remain applicable to natural persons or to 
legal persons only, even where individuals and financial institutions are jointly responsible 
for an infringement. 
2: sanctions 
applicable to both natural and legal 
persons 
 EU action ensuring that in all Member States both legal and natural persons may be held 
liable for the violation of financial services legislation.  
Administrative sanctions would be applied to the individual who committed a violation 
and to the financial institution which benefited from this violation. Legal persons would be 
responsible for the violation committed on their behalf by any person who has a leading position within the legal person. 
• Policy option 1: no EU action  
In the absence of any action at EU level, Memb er States would probabl y not extend the personal 
scope of sanctions as currently provided in thei r legislations. The fact that, in some Member 
States, natural or legal persons responsible for a violation will evade sanc tions for their illegal 
behaviour would probably not ensure optimal dissuasiveness. The problems relating to the 
divergences of sanctioning regimes (unlevel play ing field, inefficient cr oss border supervision, 
etc) would remain unsolved. 
• Policy option 2: sanctions applicable to both natural and legal persons  
Under this option, when competent authorities esta blish that the responsibility for a violation is 
on a natural person or a legal person or both of them, they will apply sanctions to all those 
EN 30   EN persons. This would significantly incr ease dissuasiveness of sanctions:45 knowing that they 
cannot escape the negative conseq uences of their illegal behaviour s, for instance, the managers 
of financial institutions would be discouraged from reiterating such beha viours and the financial 
institutions would be encouraged to take the organisational measures to prevent violations 
committed by their staff. Increased dissuasiveness of sanctions would ensure better compliance with EU rules, with positive impacts on cons umer protection, fair competition, safety and 
integrity of financial markets.  
Harmonising the personal scope of sanctions acro ss Member States would also have a positive 
impact on the level playing field in the European financial market , as the players would risk to 
be held liable for violations of EU rules wher ever they operate in th e European Union. This 
would also increase consumer confidence a nd mutual trust between supervisors.  
This option would require legislative measures to be taken at national level only in Member 
States where the scope of sanctions do not cove r both natural and legal persons responsible for 
the violation. On the basis of the information available from the Committees of Supervisors, this would concern three Member States in the banking sector, ten Member States in the insurance sector.
46 Those measures should not lead to major changes in national legal systems. 
Comparison of options 
Option 1 would not achieve any of the objectives  outlined in section 4 while Option 2 would 
help in ensuring level playing field and bette r cross-border supervision and would increase 
dissuasiveness of sanctions.  
Effectiveness in achieving the objectives below  
Improve dissuasiveness of 
sanctions Develop level 
playing field Improve trust between 
supervisors Efficiency in achieving 
all objectives 
1. Do nothing 0 0 0 0 
2. sanctions applicable to both natural and legal persons √ √ √ √  
ISSUE 3: Factors taken into account  when determining the sanctions  
This issue concerns the elements to be ta ken into account by competent authorities when 
deciding the type of administrativ e sanctions and/or calculating th e amount of the administrative 
pecuniary sanction to be applied to  the author of a spec ific violation. This includes, for instance, 
the gravity of the viola tion, the benefits for th e author of the infringe ment derived from the 
violation, the financial strength of the author of  the infringement and hi s cooperative behaviour. 
Options Description 
1: no EU action Factors taken into account by the different national authorities continue to be partly 
different.  
Member States would not be encouraged to revise their national legislations in order to 
modify or integrate the factors to be taken into account in deciding  types and amount of 
                                                 
45 See references quoted above (Foo tnote 22), in particular Granlund. 
46 CEBS report, p. 58, and reply sheets from national authorities; CEIOPS report, p. 18-20, 41, 43, 102, 106-
110, 149 
EN 31   EN the sanctions imposed. 
2: some key 
factors to be taken 
into account by all 
authorities EU action to establish some common key factors to be taken into account by all competent 
national authorities when determining the level of a sanction. 
For instance, EU action to establish that co mpetent authorities have to take into account 
the benefits derived from the violation (provided that they can be calculated), the financial strength of the author of the infringement (e.g. the annual income of an individual or the 
assets of a legal person), any cooperation by the authors of the infringement in the 
investigation, or any recurrence of violations.  
Member States could take into account, in addition to those common factors, any other 
factor they consider relevant. 
3: list of 
exhaustive and 
identical factors to 
be taken into account by all 
national authorities EU action to precisely define all factors to be taken into account by competent authorities 
in order to ensure sanctions imposed are effective, proportionate and dissuasive. Therefore, 
the same factors would be applied by competent authorities throughout the European 
Union, including the key factors mentioned in option 2. Competent authorities would not be allowed to consider other factors. 
• Policy option 1:  no EU action  
Under this option, while almost al l Member States take into accoun t the gravity of the violation, 
other factors such as the impact of the violatio n (e.g. benefits gained or  losses caused) and the 
personal conditions of the author of the infringe ment (e.g. his financial strength), would be taken 
into account only in some Member States or for certain violations. 
The existing convergence in considering the gr avity of the violation would probably be 
insufficient to ensure optimal dissuasiveness and the other factors would probably remain 
divergent.  
• Policy option 2: some key factors taken in to account by all national authorities 
This option would allow competent authorities to better adapt the type and the level of sanctions 
imposed to the impact of the violation and the personal conditions of th e offenders, which would 
help ensuring effectiveness, propo rtionality and dissuasiveness of the sanctions actually applied. 
Providing for similar types and leve l of sanctions in national legisl ations could be insufficient to 
ensure that the perpetra tors of similar violations would in cur similar sanctions in different 
Member States if the factors ta ken into account to determine th e actual sanctions imposed were 
completely different. This option would lead to increased convergence in  the way sanctions are 
applied by competent authorities across Europe while maintaining some flexibility. This would 
ease the cooperation between competent au thorities which could count on a common 
understanding of how sanctions imposed for a pa rticular violation should be adapted to the 
specifics of that violation. At the same time, Member States would ha ve the possibility to 
consider additional factors that are particular ly relevant in a specific national context.  
This option would help in ensu ring proportionality of sanctions : the sanctions imposed would 
always be linked to the benefits gained by the au thor of the violation an d would therefore better 
reflect the negative consequences of the violation. Linking the leve l of a sanction to the financial 
strength of the author of the vi olation will ensure that sanctions are sufficiently dissuasive even 
for large financial institutions. 
EN 32   EN Dissuasiveness of sanctions will also be increa sed: when pecuniary sanctions are capable to 
disgorge the profits derived from  the violation and to significantly affect the financial situation 
of the author of infringements, illegal behaviours will be further discouraged.47 Similarly, more 
severe sanctions imposed in case of recurrent violations would discou rage the repetition of 
illegal behaviours. Increased dissuasiveness woul d reduce risks of violations of EU law and 
therefore benefit consumer protection, competition, safety and integrity of financial markets.  
Furthermore, taking into account the cooperative be haviour of the author of the violation would 
help in discovering other persons  possibly responsible for the sa me violation, in assessing the 
consequences of that violation and also in de tecting other violations . This would therefore 
contribute to better detection of violations, which would be beneficial for all players in financial 
markets: the users of financial services would be  better protected; competition between financial 
institutions would less be dist orted by unfair conducts, market in tegrity and safety would be 
better safeguarded.  
This option would not require major changes in  national legislation. Some Member States 
already provide for the key factors mentioned above and the others c ould add those factors 
without repealing the existing pr ovisions. For example, on the basis of the information available 
from the Committees of Supervisors, in the mark et abuse sector, 8 Member  States already take 
into account the benefit derived from a violatio n, while the remaining Me mber States could add 
that factor to existing provision. In the banking sector, 13 Memb er States already take into 
account the financial strength of the author of an infringement , while the remaining Member 
States would have to add that factor to existing provisions.48 Therefore, compliance costs for 
Member States are expected to be limited.  
• Policy option 3: list of exhaustive and identica l factors taken into account by all national 
authorities 
This option would eliminate any divergence on fact ors to be taken into account in deciding the 
type of sanctions and/or calculating the amount of the fine to be applied to the author of a 
specific violation. Uniformity in the way sancti ons are applied would f acilitate the cooperation 
between competent authoritie s and therefore ensure bett er cross border supervision. 
As far as the uniform list of factors includes  those mentioned in option 2, the impacts of 
providing for a uniform application of those factor s would be the same than in option 2, in terms 
of proportionality and dissuasiven ess of sanctions and better detection of infringements. 
However, the list would in princi ple include only factors that can be applied in the same way in 
all national legal systems, which would preclude the possibility to  take also into account those 
factors which can be part of the fundamental principles of some legal systems but not relevant in 
others.  
Finally, this option would require changes in all na tional legislations, as it  implies a revision of 
all provisions concerning the way sanctions are applied. Importa nt investments in terms of 
resources and therefore significant comp liance costs are therefore expected.  
Comparison of options 
                                                 
47 See references quoted above (Footnote 22) 
48 CEBS report, p. 53, and responses by national author ities); CESR MAD report, excerpts from the replies of 
national authorities 
EN 33   EN Option 1 would preserve the "status quo" and th erefore would not contri bute to achieve the 
objectives of approximating and re inforcing sanctioning regimes.  
Option 3 would be the most effective in term s of facilitating coopera tion between competent 
authorities, as it would introduce a uniform list of factors to be ta ken into account by all of them. 
Option 2 would be less effective in this regard but it would allow the authorities to consider also other factors specifically linked to  the national legal system wher e they operate. Options 3 and 2 
are considered to be equally effective in terms of ensuring proportionality and dissuasiveness of 
sanctions and facilitating detection of violations, given that the key factors identified in Option 2 
are also included in the list of  factors established under Option 3. 
However, Option 2 is clearly more efficient than  option 3 as it requires less changes in national 
legislations and therefore lower compliance costs.  
Effectiveness in achieving the objectives below  
Improve dissuasiveness 
of sanctions Develop level 
playing field Improve trust 
between supervisors Efficiency in 
achieving all objectives 
1. Do nothing 0 0 0 0 
2: some key factors to be taken into account by all authorities √ √ √ √ √ 
3: list of exhaustive and identical factors to be 
taken into account by all national authorities √ √ √ √ √ √ 
ISSUE 4: criminal sanctions  
This issue concerns the application of criminal sa nctions to violations of  EU financial services 
legislation. Such sanctions may include fines, custodial measur es such as imprisonment, and 
complementary sanctions such as confiscation a nd disqualification. The op tions relating to this 
issue can be combined with all the policy op tions identified for the issues concerning 
administrative sanctions. The option of introduci ng uniform rules on criminal sanctions has not 
been considered as it wo uld not be legally viable49. 
Options Description 
1: no EU action Some Member States would continue to apply criminal fines and/or custodial penalties to 
certain violations of EU financial services legislations while other Member States would 
apply administrative sanctions only.  
While a large majority of Member States currently provide for criminal sanctions in case 
of market abuse or market manipulation, the range of the other violations for which such 
sanctions are envisaged would remain divergent across EU. 
2: introduction of 
criminal sanctions 
for the most 
serious violations EU action to identify, for each  directive, conducts which are seriously detrimental to the 
interests that EU Directives in the financia l sector aim to promote (financial market 
integrity, competition and consumer protection), for which the application of 
administrative sanctions does not prove sufficient. EU action would require Member States to ensure that these infringements are regarded as criminal offences when 
committed with intent or by serious negligence.  
                                                 
49 Article 83 TFEU provides a legal basis provides a legal basis only for the establishment of minimum rules 
concerning the definition of criminal offences and sanctions under certain conditions, not for full 
harmonisation of criminal sanctions. 
EN 34   EN Member States remain responsible for defining the constituent elements of various 
criminal offences and designing the penalty provisions. However, with regard to certain 
specific criminal offences, they  could be required to ensure that the maximum level of the 
sanctions provided for by their laws would not be below a certain minimum provided for in an EU measure. 
• Policy option 1: no EU action  
In the absence of any action at EU level, it is unlikely that Member Stat es would revise their 
criminal laws in order to achieve further converg ence in that area. Certai n Member States would 
continue to provide for criminal sanctions for cert ain violations of financ ial services legislation, 
while others would provide for administrative sanctions. Among the first group, the definition of 
the criminal offences would differ from one Memb er State to the other. Therefore there will 
continue to be divergences. 
• Policy option 2: introduction of criminal sanctions for the most serious violations  
Criminal sanctions consistently applicable to the most serious violation of  EU financial services 
law would send out a strong message of disappr oval that could increase dissuasiveness of 
sanctions and have a positive impact on the public perception of the appropriateness of sanctions: consumer confidence would increase if th ey would feel that the authors of violations 
incur criminal penalties ( stigmatisation effect ). 
The information collected in the Member States s hows that despite the lack of the obligation to 
provide for criminal offences in view of the tr ansposition of certain directives in question the 
Member States opted for such a solution in se veral areas. For example,  in case of market 
manipulation prohibited under the Market Abuse Directive, only three Member States do not 
provide for criminal fines, and three further Member States do not provide for any criminal 
sanctions.
50 In other areas criminal sanctions are pr ovided for in far fewer Member States. For 
example, violations of the init ial conditions of aut horisation of an investment firm under the 
Mifid Directive are punishable by criminal fines in only eight Me mber States and by 
imprisonment in only seven Member States. 51 
Not all violations would be subjec t to criminal penalties but only the most serious ones indicated 
by the needs of the policy in question. Criminal sanctions would only be provided for in areas 
where they are the most efficient, effective,  and dissuasive tool to achieve the proper 
enforcement of EU financial se rvices rules. Other violations  would continue to attract 
administrative sanctions.  
The nature of criminal law, its sensitivity not on ly for fundamental rights, and its link to Member 
States' sovereignty require that criminal offences  would be provided for onl y in areas where this 
is necessary as an ultima ratio.  The necessity test would have to be carried out strictly.  
Comparison of options 
Option 1 would not contribute to resolve the pr oblems identified in section 3.2., as it preserves 
the "status quo".  
                                                 
50 Source: CESR MAD report , excerpts from the replies of national authorities 
51 Source: CESR Mifid report, p. 186, 194. 
EN 35   EN Option 2 would be effective in terms of increas ing dissuasiveness of sanctions and consumer 
confidence in terms of level and type of sanctions, especially in  relation to imprisonment and so-
called additional measures (pecuniary sanctions seem to give a comparable effect when concerned by both systems). Option 2 has the ad vantage of providing the stigmatisation effect. 
The level of the resources/costs required for the modification of national criminal laws will 
probably be relatively high but thos e costs will be diminished by th e fact that the Member States 
already consider some of the violations as crim inal despite the lack of the general obligation 
stemming from the EU law. This aspect would be also taken into account when assessing the 
necessity of the introduction of  the criminal law measures. 
Effectiveness in achieving the objectives below  
Improve dissuasiveness 
of sanctions Develop level 
playing field Improve trust between 
supervisors Efficiency in achieving 
all objectives 
1. Do nothing 0 0 0 0 
2. application of criminal sanctions to the most serious violations √ √ √ √ 
ISSUE 5 EU action to support ef fective application of sanctions  
This issue concerns the mechanisms that Memb er States may put in place to improve the 
application of sanctions, and part icularly detection of violati ons of EU financial services 
legislation. In addition to the provision for appropr iate sanctions in national legislation, it is key 
for the effectiveness of sanctioning regimes to ensure that sanctions are actually applied when a violation occur. Therefore, the policy options concerning this issue should ideally be combined 
with those concerning the ot her issues mentioned above. 
The application of sanc tions for violations of EU financial services legislation is the 
responsibility of national au thorities. It has to be noted that insufficient detection of violations 
might be due to a number of reasons, such as la ck of human and financia l resources devoted to 
the activities of national supervisory authorities or lack of appropriate training of persons 
carrying out investigations. Moreove r, insufficient application of sa nctions might be the result of 
the difficulty to prove certain viol ations of financial services rule s, the strict rules on burden of 
proof, and possibly the lack of specific expertise in  the field of financial services of the national 
authorities responsible for the application of sanctions. However, thes e potential problems are 
mainly related to the organisation and functioning  of national administration and data are lacking 
on their actual relevance. Therefore, EU action envisaged in this field will not address these potential problems, which could be better addresse d at national level. Nevertheless, the EU can 
take action to ensure that (1) all national authorities have the ne cessary key powers and 
investigatory tools, and (2) national author ities cooperate and c oordinate their action 
appropriately. While the degree of convergence in relation to most key powers and investigatory 
tools on the basis of existing le gislation is already relatively high, no such convergence has yet 
been reached concerning, in particular, mech anisms encouraging persons who are aware of 
potential violations to report those violations w ithin a financial institution or to the competent 
authorities ("whistleblowing"), and at encour aging persons who are re sponsible of potential 
violations, to report those violations  to the competent authorities.  
Cooperation between competent authorities of different Member Stat es and the cooperation 
between those authorities and the new European  Supervisory authorities could be further 
strengthened for the purpose of detecting vi olations and imposing appropriate sanctions. 
EN 36   EN Options Description 
1: Coordination by ESAs - 
no additional EU action No action in relation to consistent and pr edictable programs to protect whistleblowers 
and to exempt them from sanctions when they are involved in the infringement 
("leniency programs"). 
National authorities cooperate on the basis of  the provisions concer ning the exchange 
of information and the mutual assistance in investigations in the EU Directives 
applicable in the financial sector. 
New European Supervisory Authorities can use their powers to carry out peer reviews 
and collect information on sanctions to promote exchange of information and best 
practices between Member States.  
2: additional EU action to 
ensure all Member States 
provide for key 
investigatory powers and tools,  Consistent measures taken by all Member States to protect persons (e.g. employees of 
financial institutions) who denounce potential violations of financial services 
legislation committed by other persons, and providing for reduction of sanctions 
applicable to the persons who confess their involvement in a violation.  
 
• Policy option 1: no EU action 
Under this option, certain Member States would c ontinue to provide for rules obliging financial 
institutions to put in place early warning syst ems for malfunctions in the internal control 
mechanisms and prohibiting retalia tion against whistleblowers. Howe ver, the large majority of 
them would probably not put in place consis tent and predictable programs to protect 
whistleblowers and to exempt them from sanctions  when they are involved in the infringement 
("leniency programs"). 
Competent authorities would conti nue to cooperate with each ot her making use of the existing 
mechanisms. They would render assistance to co mpetent authorities of other Member States, 
particularly by exchanging information and cooper ating in investigation activities. Under this 
option, it is expected that the ro le played by the new ESAs woul d further facili tate cooperation 
between competent authorities, which would help in ensuring mo re consistent application of 
sanctions and more efficient supervisory activ ities. In particular, mechanisms for ensuring 
agreement and co-ordination between national supervisors of the same cross-border institution or in colleges of supervisors will be introduced, an d the ESAs will have th e possibility of settling 
disagreements between national au thorities, in some areas that  require cooperation, coordination 
or joint decision making by supervisory authori ties from more than one Member State.  
 Better detection of infringements and more consis tent application of sanctions would increase 
their dissuasiveness, to the benefit of the overal l functioning of financial markets and the users of 
financial services. 
• Policy option 2: additional EU action to  ensure all Member States provide for key 
investigatory powers and tools 
Under this option, Member States would count on a dditional instruments to detect violations of 
EU law, and particularly on the assistance of pe rsons involved in illegal conducts or aware of 
wrongdoings from third parties. When violat ions are regularly detected and punished, 
dissuasiveness and effectiveness of sanctions would be increased. As explained in the analysis of 
the previous issues, this could reduce violations of  EU rules and would therefore be beneficial to 
consumers' protection, competition, safety and inte grity of financial markets. The perception that 
EN 37   EN the authors of infringements ar e usually discovered and effectiv ely punished would also restore 
confidence in the financial sector.  
Comparison of options  
Under option 1, the objective of re inforcing national sanctioning regimes could be achieved to a 
certain extent through the coordination activity that  the new ESAs are alr eady entitled to carry 
out. Option 2, while including the activities of the new ESAs, would be nevertheless more 
effective in terms of better and more consiste nt enforcement of sanctions, as new forms of 
cooperation would be developed and new instrument s would be available to detect violations. 
As to their efficiency, Option 1 would probably re quire additional administrative activities to be 
carried out by the competent authorities (e.g. collecting information and providing them to 
ESAs), but they are unlikely to bring about import ant investments in terms of costs or resources, 
as Member States could use the existing admini strative structures. Opti on 2 would require, in 
addition, actions to put in place whistleblowing mechanisms and leniency programs from those 
Member States which currently don't provide for them: national legal frameworks would have to 
be supplemented and adapted but should not require major changes. Whistleblowing 
mechanisms could also require some organisational measures to be taken by financial institutions 
(e.g. on internal reporting of misconducts and confidentiality of whistleblowers identity)  
Effectiveness in achieving the objectives below  
Improve 
dissuasiveness of 
sanctions Develop level 
playing field Improve trust 
between 
supervisors Efficiency in 
achieving all objectives 
1. Coordination by ESAs - no additional EU action  √ √ √ √ 
2. additional EU action to reinforce mechanisms 
facilitating detection of violations/application of 
sanctions √√ √√ √√ √ √ 
5.1.1.  Preferred policy options 
In the light of the comparative analysis ca rried out in section 5.1, the following options 
concerning the content of the measures have been  selected for the five issues addressed:  
• ISSUE 1: policy option 2 - introducing minimum common crit eria on type and level of 
administrative sanctions  
• ISSUE 2 : policy option 2 - sanctions applicable to both  natural and legal persons  
• ISSUE 3:  policy option 2 - some key factors taken into account  by all national authorities.  
• ISSUE 4:  policy option 2 - introduction of criminal sanctions for the most serious 
violations.  
• ISSUE 5: policy option 2 - reinforcement of mechanisms facilitating detection of 
infringements/enforcement sanctions.  
5.1.2.  Cumulative impacts of the preferred options  
The impacts of the preferred options will be further reinforced by the cumulative nature of the 
action taken, as convergence on all of those issues  together will ensure na tional authorities have 
EN 38   EN at their disposal a broad range of  sanctioning powers that enable them to apply, in each specific 
case, the sanctions that are the most appropriate in terms of effectiveness, proportionality, and 
dissuasiveness. The cumulative action will therefore increase the positive effect on financial institutions, users of financial se rvices, and on public authorities in charge of the application of 
sanctions. 
As the expected consequence of the preferred polic y options is to improve the application of EU 
rules, the specific impacts of those options on stake holders are in fact the same as the impacts of 
those rules themselves, which have been identified and assessed in the impact assessments of the Commission proposals for those rules. 
Impact on SMEs : the preferred policy options are not expected to have specific impacts on 
SMEs. More efficient sanctioning regimes ensuring better compliance with EU law would benefit to all players in financial markets, as we ll as all users of financial services, including in 
both cases SMEs. 
Simplification and Ad ministrative burden : the preferred policy options will not create  an 
administrative burden on financial institutions, or non-financial companies, which are already 
today subject to sanctioning regimes in all Me mber States. More uniform sanctioning regimes 
throughout the EU may in fact lead to reduced co mpliance costs for market  participants through 
the simplification of the legal framework for cross-border financial institutions. Social impacts : 
the preferred policy options wi ll have a positive impact on ove rall consumer protection and 
confidence. They will also have a positive impact  on employees and society at large, to the 
extent that they reduce the risk of financial in stabilities caused by violati ons of EU law, which – 
as the financial crisis in 2007/2008 has shown – can have a strong negative impact on the 
economy at large and on employment.  
Environmental impacts : none foreseen. 
Third country impacts : The reinforced focus on effective, proportionate and dissuasive 
sanctioning regimes is compatible with the comm on objectives of major jurisdictions within the 
G20 Group to strengthen the regulat ion and supervision of the financ ial sector. It is in line with 
developments in other jurisdictions. For example, the US has recently adopted rules to reinforce the detection of violations in  the framework of the Dodd-Frank-Bill of July 2010. Moreover, 
several sanctions applied by US regu lators in the aftermath of the financial crisis express a level 
of concern to ensure sufficient deterrence that is without doubt equivale nt to the suggestions 
made in this Communication.  
Impact on EU competitiveness : the preferred policy options are expected to have a positive 
impact on the EU's competitiveness. A strong and credible enforcement of financial services 
rules contributes to the stability of the EU financial sector, with positive effects on it. Moreover, 
it contributes to strengthening th e EU, in competition with othe r jurisdictions, as a centre for 
reliable and stable financial services industries,  benefiting from a high level of confidence by 
investors and consumers. 
5.1.3.  Impact on EU budget: 
The policy options selected in section 5.1.1 do not have any imp lication for the budget of the 
European Union. Revision of sanctioning regi mes would be primarily managed by national 
authorities. 
EN 39   EN 5.2. Options relating to the nature of the measures 
This section assesses the policy instruments that  may be used to implement the policy options 
selected in section 5.1.1. The following options ther efore deal with the na ture of the measures 
that may be taken to this end.  
The options have been assessed against the ba seline scenario (see sec tion 3.2.2), and compared 
in terms of efficiency and effectiveness, to identify the most appropriate instrument for the 
implementation of the set of pr eferred measures concerning th e issues to be addressed.  
• Policy option 1: non binding measures facilita ting approximation of sanctioning regimes  
This non-regulatory option would cons ist of EU initiatives aimed at: 
– raising Member States awareness on the problems  relating to the inefficiency and divergence 
of national sanctioning regimes;  
– promoting cooperation and exchange of good practices between Member States; 
– providing guidance/issuing recommendations on key issues such as type and level of 
sanctions, addressees of sancti ons, criteria to be taken into account in the application of 
sanctions, introduction of criminal sancti ons for the most serious violations.  
Within this option, the Commission would help Me mber States in identifying failures in their 
national legislation and suggest  measures they may take on a voluntary basis on how to 
strengthen national sanctioning regimes in a consistent manner.  
Member States would not be obliged to make any change in national legisl ations but they would 
revise the existing sanctioning regime only if, and to  the extent, they consider it appropriate. As 
to its effectiveness, this option would provide Member States with a general common framework 
on how to deal with all issues. In particular, this would support the actions they would be willing 
to take in order to approximate the type and le vel of administrative sa nctions, the personal scope 
of them and the factors to be taken in the a pplication of sanctions, as well as to introduce 
criminal sanctions and to reinforce the mechanisms facilitating detection of infringements. However, in the absence of any obligation, it woul d not be ensured that all Member States take 
all measures required. Moreover, the relevant issu es would be probably dealt with differently by 
each Member State. 
 
• Policy option 2: minimum approximation of  sanctioning regimes - sectoral approach 
This option would involve legislative action at Community level to set common minimum 
standards in the directives concerned on some key issues of sanctioning regimes. 
Such standards would concern primarily administ rative sanctions and would be adapted to the 
specifics of the different EU Directives. The introduction of criminal sanctions for the most serious violations could be envisaged where th is would prove necessary to ensure effective 
application of EU law.  
This would imply that new provisi ons on the issues 1, 2, 3, 4 and 5, would be introduced in the 
sectoral directives to the extent that problems have been identified in relation to those directives.  
EN 40   EN This option appear to be very effective in addressi ng the above mentione d issues: targeted 
provisions in sectoral directives would permit to set common standards on types and level of 
sanctions, addressees of sanctions and factors to  be taken into account in the application of 
sanctions, which are the most appr opriate in the specific sector, and for the specific directive 
concerned. Under this option, an obligation to provi de for criminal offences could be introduced 
if and when necessary, depending on the ch aracteristics of the sector concerned.  
As to the issue 5, this option would permit to introduce targeted common rules on 
whistleblowing and on the cooperation with ESAs (eg. in some areas ESAs could be entrusted 
with a role of mediator). Rules on the coopera tion between competent aut horities could also be 
reinforced where the ones already provided for in the directive concerned do not prove sufficient.  
Under this option, Member States  would still enjoy a significan t discretion in the choice and 
application of sanctions. They would be obliged  to ensure compliance with some minimum EU 
standards but would be allowed to provide for more  stringent rules. Therefore, this option would 
not necessarily require important changes in national sanctioning regimes. 
• Policy option 3: minimum approximation of sanctioning regimes – cross-sectoral 
approach 
This option would require a gene ral legal framework at EU level applicable across sectors 
(banking, insurance, securities). 
The European legislator would specify the gene ral principles to be taken into account in 
designing sanctioning regimes in th e financial services sector. Ex isting general clauses such as 
those requiring that sancti ons are effective, proportionate a nd dissuasive will be explained and 
detailed, in order to clarify their meaning.   This option would allow for the implementation of  the policy options sel ected for the issues 1,2, 
3 and 5, as Member States would be obliged to re vise their sanctioning regimes in order to adapt 
them to the general principles set at EU le vel, which may cover the issues 1,2,3 and 5. A 
common framework would guarantee the overall coherence of the re view of sanctioning regimes. 
This option would not address th e issue 4, as a cross sectoral approach would not permit to 
identify the most serious violations for which criminal sanctions are necessary.  
However, as EU legislation would have to be applicable to all sectors, it could cover very 
general issues only. Consequently, Member States  would maintain considerable discretion in 
implementing the common rules set at EU level, which would significantly reduce the effectiveness of this option.  
• Policy option 4: full approximation of sanctioning regimes – sectoral approach 
In this option, which also requires EU level re gulatory action, fully harmonised administrative 
sanctions would be established across the EU , in each of the sectors concerned. Full 
approximation is in any case excluded for criminal sanctions, given that th e European legislature 
has not the power to fully harmonise them  but only to establish minimum rules. 
EU legislation would set out deta iled rules on administrative sanc tions applicable to different 
categories of infringements. Th is option would therefore imply a complete set of provisions 
regulating all elements of the sanctioning regime. 
Full approximation of sanctioning regimes would therefore not be suitable for the 
implementation of the policy measures selected  for the issues 1 and 3, which exclude the 
EN 41   EN introduction of uniform rules on the type and the level of administra tive sanctions and the factors 
to be taken into account in th e application of sanctions.  
On the contrary this option would be effective in dealing with issu e 2, as it would ensure that 
sanctions are always applicable to both natura l and legal persons involved in the violation.  
As to issue 5, while full approximation would ach ieve the objective of reinforcing mechanisms 
facilitating detection of the vi olations, it would probably requi re major changes in national 
legislations and therefore signifi cant investments in terms of resources and compliance costs for 
Member States. Moreover, if whistleblowing m echanisms and leniency programs are regulated 
in detail at EU level, Member States will not be allowed to adapt them to the specificities of their 
legal systems, which could affect the effectiveness of such mechanisms.  
5.2.1.  Preferred policy instruments 
Following the above assessment of the options re lating to the nature of the measures, we 
consider that the most appropriate to address th e issues analysed in se ction 5.1 is a legislative 
action aiming at minimum approximation of nati onal sanctioning regimes, covering potentially 
all the issues concerned. Legisl ative action would ensure that Member States will implement 
consistently the measures identified in section 5.1.1.  
The most effective approach is  considered to be the sector al approach under option 2, which 
would permit to introduce precise provisions coveri ng all the issues to be  addressed (type and 
level of sanctions, addressees of sanctions, factors to be taken into account for the application of 
sanctions and mechanisms facilit ating detection of the violati ons, and possibly the introduction 
of criminal sanctions for the most important vi olations). This option could be combined with 
option 3 by establishing some basi c principles common to all sect ors, which would guarantee the 
overall coherence of any EU action in this field. 
6. MONITORING AND EVALUATION  
This Impact assessment provides evidence suppor ting the need for EU action based on minimum 
harmonization of sanctioning regimes ensuring compliance with certain common standards. 
 
The policy options selected will be presented in the Commission communication in order to 
allow all the stakeholders concerned to comme nt on the approach proposed. The Commission 
will carefully evaluate the feedback received an d take it into account when coming forward with 
firm proposals. The Commission will sum up the cont ributions received by the first half of 2011. 
The Commission, while drafting such proposals, w ill monitor and update its assessment of the 
various policy options selected. A comprehens ive monitoring and evaluation programme, based 
on appropriate indicators, can only be devel oped once detailed proposals have been made. 
EN 42   EN ANNEX  1 
 
List of the main Directives concerned 
 
• Directive 2006/48/EC of the European Parliame nt and of the Council of 14 June 2006 relating 
to the taking up and pursuit of the business of credit institutions ("Capital Requirements 
Directive") OJ L302 17.11.09;  
• Directive 2004/39/EC of the European Par liament and of the Council of 21 April 2004 on 
markets in financial instruments (" MiFID Directive"), OJ L145 30.04.2004;  
• Directive 2003/6/EC of the European Parlia ment and of the Council of 28 January 2003 on 
insider dealing and market manipulation ("Ma rket Abuse Directive" or "MAD"), OJ L096 
12.04.2003;  
• Directive 2009/138/EC of the Eu ropean Parliament and of th e Council of 25 November 2009 
on the taking-up and pursuit of the business of  Insurance and Reinsurance ("Solvency II 
Directive) OJ L335 17.12.2009;  
• Directive 2003/71/EC of the European Parliame nt and of the Council of 4 November 2003 on 
the prospectus to be published when securities are offered to the public or admitted to trading 
("Prospectus Directive") OJ L345 31.12.2003;  
• Directive 2002/92/EC of the European Parlia ment and of the Council of 9 December 2002 on 
Insurance Mediation, OJ L009 15.01.2003;  
• Directive 2005/60/EC of the European Parliame nt and of the Council of 26 October 2005 on 
the prevention of the use of the financial sy stem for the purpose of money laundering and 
terrorist financing ("Anti-Money La undering Directive"),OJ L309 25.11.2005;  
• Directive 2009/65/EC of the Eu ropean Parliament and of th e Council of 13 July 2009 on the 
coordination of laws, regulations and administ rative provisions relating to undertakings for 
collective investment in tr ansferable securities ("UC ITS Directive"),OJ L302 17.11.2009. 
EN 43   EN ANNEX II  
Chart 1: EU contribution to world fi nancial activity in % (2008/20009) 
50131027
38321615
2536101015
35351215
0102030405060708090100
Bank Assets Insurance
PremiumsStock Market
CapitalisationDebt SecuritiesOthers
India
China
Japan
US
EU%
 
Source: European Commission, European Financial Integration Report 2008 (2009) 
Chart 2 - Market share of foreign-owned banks (% of total assets) 
0102030405060708090100
EECZ LU SK RO BG LT PLLV FIHU UK IEGRMT CYSI
EU-25BE PT DKAT
EMU-12NLIT ES DE FRSE
 
Source: European Commission, European Financial Integration Report 2008 (2009)