EN    EN EN 
 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 23.9.2009 
SEC(2009) 1233 
  
COMMISSION STAFF WORKING DOCUMENT 
 
accompanying document to the 
Proposal for a  
 
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 
 
establishing a European Banking Authority 
  
Proposal for a  
 
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 
 
establishing a European Insurance a nd Occupational Pensions Authority 
  
Proposal for a  
 
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 
 
establishing a European Securities and Markets Authority 
  
POSSIBLE AMENDMENTS TO FINA NCIAL SERVICES LEGISLATION  
 
  
{COM(2009) 501 final} 
{COM(2009) 502 final} 
{COM(2009) 503 final} 
{SEC(2009) 1234} {SEC(2009) 1235} 
 
EN 2   EN Introduction 
The Commission Communication of 27 May 2009, "European financial supervision"1, 
proposed changes to strengthen the architecture  of European financial supervision following 
the financial market disruption that began in  2007. Specifically, it proposed the creation of 
two new bodies: 
• a European Systemic Risk Council (ESRC)  to monitor and assess risks to the stability of 
the financial system as a whole ("macro-pr udential supervision"),  and provide early 
warning of systemic risks that may be building up and, where necessary, recommendations for action to deal with these risks.  
• a European System of Financial Supervisors (ESFS)  for the supervision of individual 
financial institutions ("micro-prudential supervision"), consisting of a network of national financial supervisors working in tandem w ith new European Supervisory Authorities 
(ESAs), created by the transformation of ex isting Committees for the banking, securities 
and insurance and occupa tional pensions sectors.
2 The Communication proposed 
transferring to the new Authorities all of th e current competences of the Committees in 
question and granting them extra co mpetences, including the following: 
• Developing proposals for technical standards; 
• Settling cases of disagreement between  national supervisory authorities, 
including within colle ges of supervisors; 
• Contributing to ensuring compliance with Community law; 
• Exercising direct supervisory powers for defined entities with a pan European 
reach; 
• Co-ordination and decision-maki ng in crisis situations; and 
• Collecting relevant information. 
The Communication stated that  the Commission intended to bring forward, as soon as 
possible, the legislative changes to put in pl ace the new framework for EU supervision, on the 
basis of the orientations set out in the Co mmunication and after further consultation of 
stakeholders, so that the necessary measures  could be adopted in time for the renewed 
framework to be up and running before the e nd of 2010. It invited th e European Council to 
endorse this plan.  The Conclusions of th e European Council of 18-19 June 2009 supported 
the creation of an ESRC (renamed European  Systemic Risk Board, ESRB) and an ESFS, 
consisting of the three ESAs. 
The Communication also concluded that in order for the ESFS to work effectively, changes to 
the financial services legislatio n would be necessary, in particul ar to provide an appropriate 
scope to the more general powers provided for in the individual regula tions establishing the 
authorities, ensuring a more harm onised set of financial rules through the possibility to 
develop draft technical standards and to faci litate the sharing, wher e necessary, of micro-
prudential information. 
                                                 
1 COM(2009) 252 final. 
2 The 3 level 3 committees, CESR, CEBS and CEIOPS 
 
EN 3   EN This document accompanies the proposals for legislative acts creating the ESFS and outlines 
the possible changes that may be made in the rele vant sectoral legislation.  The areas in which 
amendments may be proposed fall broa dly into the following categories: 
• Definition of the appropriate scope of technical standards  as an additional tool for 
supervisory convergence and with a view  towards developing a single rule book 
(Section 1 and Annex I). 
• Changes to the credit rating agencies regulation to allow the European Securities and 
Markets Authority to exercise direct supervision  of such entities (Section 2). 
• To appropriately integrate the possibility for the authority to settle disagreements  in 
a balanced way to those areas where comm on decision making processes already exist 
in sectoral legisl ation (Section 3). 
• General amendments  which are common to most sect oral legislation and necessary 
for the directives to operate in the context of new authorities for example, renaming 
the level 3 committees to th e new authorities and ensuri ng the appropriate gateways 
for the exchange of informa tion are present (Section 4). 
This document gives an overview of the amendm ents that should be made to the banking, 
insurance and securities sectoral legislation to ensure the Authorities can ope rate effectively.  
However they do not constitute a formal pr oposal.  The Commission will propose a package 
of detailed legislative change s for the Council and Parliame nt by the end of October 2009. 
General scope of competencies of each respective Authority  
For clarity when discussing the changes outlined in the remainder of this document, the list of 
directives relevant to each authority is provided below. 
European Banking Authority 
• Financial conglomerates directive (FCD):3 The FCD ensures the effective 
supervision of financial conglomerates - fi nancial groups active in different financial 
sectors, often across borders.   
• Capital requirements directive (CRD):4  The CRD sets the EU rules on capital 
requirements for credit institutions and inve stment firms.  The CRD implements the 
Basel II accord into EU legislation and deal s with a number of areas not covered in 
the accord but critical to  the functioning of the single market.   
• Anti money laundering directive:5  To limit opportunities fo r money laundering and 
financial crime, those subject to the Directive are required to identify and verify the 
identity of their customer and of its beneficial owner, m onitor their business 
relationship with the customer ; and report suspicions of m oney laundering or terrorist 
financing to the public authorities. 
                                                 
3 2002/87/EC 
4 2006/48/EC 
5 2006/60/EC 
 
EN 4   EN • Deposit guarantee schemes directive:6  Deposit Guarantee Schemes reimburse a 
limited amount of deposits to depositors whos e bank has failed to help to protect both 
depositors and wider financial stability.   
• Regulation on information on the p ayer accompanying transfer of funds:7 The 
Regulation lays down rules for payment serv ice providers to send information on the 
payer throughout the payment chain. This is  done for the purposes of prevention, 
investigation and detect ion of money laundering a nd terrorist financing.  
European Insurance and Occu pational Pensions Authority 
• Financial conglomerates directive:  See above  
• Institutions for Occupational Reti rement Provision directive (IORP):8  The IORP 
directive provides a framework for the prude ntial regulation of occupational pension 
schemes that operate on a funded basis and are outside the scope of social security 
schemes. It puts in place minimum standard s to facilitate cross-border operation by 
pension schemes. 
• Current Insurance and Reinsurance Directives :9 The current regime for insurance 
and reinsurance supervision is contained in  a number of differe nt directives (life 
directives, non-life directiv es, reinsurance directive,  winding-up directive and 
insurance groups directive).   
• Solvency II:  In spring 2009 Council and European Parliament agreed on the 
Solvency II Directive. The Directive consis ts of a recast of 14 existing insurance and 
reinsurance directives and a modern, ec onomic and risk-based regime for the 
supervision of insurance and reinsurance undertakings, and of insurance/reinsurance 
groups.  The new regime will come into force end October 2012.    
• Insurance mediation directive (IMD):10  The IMD introduced a set of requirements 
for the regulation of EU insurance intermedia ries, to permit them to operate in other 
Member States, on an establishment or freedom of services basis.  
•  Anti money laundering directive:  See above 
European Securities and Markets Authority 
• Financial conglomerates directive:  See above  
• Transparency directive:11 The Directive sets out minimum requirements which govern 
takeover procedures in the EU , with a view to giving ad equate protection to minority 
shareholders across the EU in takeover situations a nd facilitating corporate restructuring. 
                                                 
6 94/19/EC 
7 1781/2006/EC 
8 2003/41/EC 
9 For a full list please see Article 2 of the draft Regulatio n establishing a European Insurances and Occupational 
Pensions Authority 
10 2002/92/EC 
 
EN 5   EN • Markets in Financial Inst ruments directive (MiFID):12  The MiFID provides a 
harmonised regulatory regime for investment services across Europe.  It replaced the 
Investment Services Directive and sets, among other things, requirements governing the 
organisation and conduct of business of invest ment firms, and how regulated markets and 
multilateral trading facilities operate. 
• Market abuse directive (MAD):13  The MAD prohibits abusiv e behaviour such as 
insider dealing and market manipulation. It cr eates obligations aimed at deterring abuses, 
such as insiders' lists, suspicious transac tion reporting, and disclosure of trades by 
managers of issuers.   
• Prospectus directive:14  A prospectus is a disclosure doc ument, containing key financial 
and non-financial information, that a compan y makes available to potential investors 
when it is issuing securities (shares, bonds, derivative securities, et c.) to raise capital 
and/or when it wants its securities admitted to trading on exchanges.   
• Undertakings for Collective Investment  in Transferable Securities Directive  (UCITS 
Directive):15  UCITS directive sets out common requirements for authorisation, 
management and oversight of undertakings for co llective investments, in  particular  rules 
relating to fund diversification, liquidity and use of leverage. The UCITS directive defines 
also a list of eligible asse ts in which the fund can invest . Once authorised, a UCITS fund 
can be marketed to the public across the EU subject to notification in each Member State  
• Credit rating agencies regulation:   The regulation la ys down conditions for the issuance 
of credit ratings.  It introduces  a registration procedure for cr edit rating agencies to enable 
European supervisors to control the activities of rating agencies whose ratings are used by 
credit institutions, investment  firms, insurance, assuran ce and reinsurance undertakings, 
collective investment schemes and pe nsion funds within the Community. 
• Take-over Bids directive:16  The Directive sets out to establish minimum guidelines for 
the conduct of takeover bids involving the secur ities of companies governed by the laws of 
Member States, where all or some of those s ecurities are admitted to trading on a regulated 
market.  
• Settlement finality directive (SFD):17 the SFD provides that transfer orders entered into 
payment and securities settlement systems ca nnot be revoked or othe rwise invalidated. It 
also protects the collateral provided to a central bank and coll ateral provided in 
combination with participation in a designated system from the effects of the insolvency of the collateral giver.  
• Financial collateral arrangements directive:
18 the Financial Collateral Directive created 
a uniform EU legal framework for the use of financial collateral by abolishing most of the 
                                                                                                                                                         
11 2004/109/EC 
12 2004/39/EC 
13 2003/6/EC 
14 2003/71/EC 
15 2009/65/EC (recast of th e directive 85/611/EC) 
16 2004/25/EC 
17 98/26/EC 
18 2002/47/EC 
 
EN 6   EN formal requirements traditionally imposed on collateral arrangements and by insulating 
collateral arrangements against insolvency.  
• Investor compensation schemes directive:19  The Directive requires Member States to set 
up one or more investor compensation schemes.  All investment firms supplying investment 
services must belong to such a scheme.  
• Directive on the admission of securities to official stoc k exchange listings and on 
information to be published on those securities:20  the directive spec ifies conditions that 
must be met before securities are admitted to official listing on a stock exchange  
• Anti money laundering directive:  See above 
• Capital Requirements Directive (2006/49/EC):   For aspects not related to prudential 
supervision.  See above.  
• Distance Marketing Directive:21 the directive sets minimum st andards that must be met 
before financial services can be marketed to across borders.  
                                                 
19 97/9/EC 
20 2001/34/EC 
21 2002/65/EC 
 
EN 7   EN 1.  Technical standards  
The establishment of the three European Supe rvisory Authorities will be accompanied by the 
development of a single rule book which will ensu re uniform application of rules in the EU 
and contribute to a more effective functioning of  the internal market. The Authorities will, as 
specified in sectoral legislati on, develop technical standards in areas selected on the basis of 
criteria outlined below.   
The European Supervisory Authorities will hold  the key responsibility for developing draft 
standards which will be adopted by the Authorities on the basis of qualified majority of the 
members of the Boards of supervisors as  defined in Article 205 of the Treaty. The 
Community legal order requir es the Commission to endors e the draft standards by the 
adoption of Commission Regulations or Decisions  in order to give them legal effects and 
allow financial institutions and other entities or persons concerned to invoke their provisions 
before national authorities an d courts. The proposals for the regulations provide that the 
Commission should be subj ect to a time limit of normally th ree months for its decision on the 
endorsement. For reasons of Community interest , the Commission may decide not to endorse 
the standards or to endo rse them only in part or with am endments, the reasons for which it 
will make available to the Authority. 
The Authorities will develop the standards us ing better regulation principles including 
appropriate consultation. The proposed regulations provide fo r the Authorities to consult 
stakeholders through open consultations and/or  through relevant stakeholder groups.  In 
developing their internal rules and procedures , the Authorities should design appropriate 
policies building on the relevant guidelines th at already exist for the level 3 Committees22. 
Technical standards and the Lamfalussy framework 
The technical standards constitute a complement ary instrument to strengthen the current level 
3 of the Lamfalussy structure which is limite d to the adoption of non-binding guidelines. The 
new technical standards may cover matters wh ich are currently the subject of non-binding 
guidelines at level 3, upgrading the guidelines to be binding, as  well as genuinely technical 
matters currently subject to a level 2 empowerment under which implementing measures have not yet been adopted. Consideration could also be given to whether technical standards should 
also be used to further specify some genuinely technical matters which are covered by level 2 rules, which have been adopted  on the basis of an empower ment to the Commission given 
under the Level 1 instruments, without supp lementing the level 1 and 2 instruments 
concerned. As per the current remit of the Le vel 3 Committees, the possibility remains for the 
Authorities to draw up non binding guidelines in order to contribu te to consistent supervisory 
practices and application of  Community legislation.   
The system set up whereby the Authorities will develop draft standards is without prejudice to 
measures, other than genuinely  technical, which the Commissi on is empowered to adopt in 
the sector legislation at leve l 2 under the Comitology proce dures. The Standards must be 
consistent with both the le vel 1 and 2 legislation.  
                                                
 
22 http://www.c-ebs.org/getdoc/27041300-341c-4 4ee-878f-5f6e3caf9c96/3L3-IA-GL.aspx  
http://www.c-ebs.org/getdoc/eed60d2e-5caf-494f-9422-2467ba1e4bbb/20080805_CP01rev.aspx  
http://www.ceiops.eu/media/files/consultatio ns/statementonconsultation/cp_0401_ps.pdf  
http://www.cesr-eu.org/popup.php?ref=01-007c  
 
EN 8   EN The areas where the Authority may develop draf t technical standards for endorsement by the 
Commission concern issues of a highly technical nature. Irresp ective of their binding nature 
following endorsement by the Co mmission, the matters concerned by the standards will not 
involve policy decisions, and th eir content will be framed by the Community acts adopted at 
Level 1. Development of draft standards by the Au thorities ensures that they benefit in full 
from the specialised expertise of supervisors.  
General principles for selecting measures for technical standards  
The identification of areas for technical st andards is based on the following high level 
principles: 
• Technical issues:  those areas selected are genuinely technical, where the development of 
standards is best left to s upervisory experts.  They are areas which do no t involve policy 
decisions. 
• Practical issues/cooperation procedures:  relate to practical issues like procedural 
approaches to information exchange which could enhance cooperation between 
supervisory authorities, and which are of a di rect concern to the authorities involved. 
These areas should include such issues where a common approach or predictability would 
be of benefit to all concerned. 
• Flexibility:  where it is important to have technical flexibility to respond rapidly to future 
market developments or where in some areas it is not necessary to make changes now but 
to have the option to do so if necessary at a later date.   
• Necessity:  only those areas where deta iled, technical and consiste nt rules are needed for 
financial stability, depositor, policy holder and investor protection, to ensure market 
efficiency and integrity or to strengthen the si ngle market have been selected. This ensures 
an appropriate balance is struck between building a si ngle rulebook, and not unduly 
increasing the complexity of regulation. 
The areas where it is possible to develop techni cal standards will be specified precisely in the 
sectoral legislation. Empowerment will, as is normal, be made at level 1.  In the case of 
existing non-binding level 3 guide lines which are proposed to b ecome technical standards, 
they will need to be scrutinised carefully by the Authorities to ensure they remain appropriate 
and be amended if necessary.  
Annex I provides an overview of the key areas by  directive, such as s upervisory standards for 
colleges of supervisors and technical standard s for internal model validation in banking and 
insurance. In practice, the types of areas co vered by technical standards fall into three 
categories. Firstly, standards may be develope d in those areas where detailed methodological 
or quantitative standards are requ ired to ensure consistent a pplication of certain rules and 
where there is generally less need for superv isory judgement. Secondly, in those areas that 
would benefit from a uniform approach to repor ting or disclosure for example in facilitating 
work towards a uniform reporting format in banking by 2012. Finally, in those areas where supervisors would benefit from a consistent approach to cooperation processes including in 
terms of supervisory risk assessment and informa tion sharing, for example in situations where 
host supervisors of branches w ould benefit from a consistent minimum set of information 
from home supervisors.  
 
EN 9   EN 2.  Direct supervision of Credit Rating Agencies 
The Regulation on Credit Rating Ag encies should be revised in order to introdu ce centralised 
oversight of credit rating ag encies (CRAs) operating in th e EU. The ESMA should assume 
general competence in matters relating to the registration and on-going supervision of 
registered CRAs as well as surveillance of those overseas CRAs that  operate under the 
certification or endorsement regimes. At the same time, national supervisory authorities, 
acting in their specific fields  of competence, should have the oversight responsibilities 
regarding the use of credit ra tings by the supervised entities (like credit institutions or 
insurance undertakings) which employ thos e credit ratings for regulatory purposes.  
In order to ensure sufficien t supervisory and enforcement capacity, the ESMA should be 
empowered to require all necessary informati on from CRAs and other persons related to 
credit rating activity. It should be  able to start investigations into potential breaches of the 
Regulation and in the remit of those it shou ld be able to exercise supervisory powers 
corresponding to those already available to national supervis ory authorities (e.g. examining 
records and other relevant material and ta king copies/extracts thereof, requiring oral 
explanations, hearing a person, requiring records of telephone and data traffic). The ESMA 
shall also be able to co nduct on-site inspections.  
Where necessary or appropriate for reasons of  efficiency, in its supervisory activity the 
ESMA should be able to seek  the assistance or coopera tion of a national supervisory 
authority.  As the necessary underpinning to its supervisory authority, the Commission will 
consider further enforcement issues. 
As a result of introductio n of the new, single supervisory au thority for the oversight of CRAs, 
existing provisions, which envisage a college type of supervisory co-ordination and ultimate, formal decision-making by a competent authority  of the home Member State, should be 
changed.  National supervisory authorities should nonetheless c ontribute to the supervisory 
activity of the ESMA, by ensuri ng all necessary information exchange and co-operation.  In 
limited cases, they should be able to take so me clearly defined measures (for example, 
to request the ESMA to examine whether the conditions for with drawal of a CRA's 
registration are met).  
 
EN 10   EN 3.  Settlement of disagreements 
The explanatory memorandum accompanying the three regulations explains the proposed 
process for settlement of disagreements in detail.  The possibility for settlement of 
disagreements arises in all areas of sectoral  legislation where coope ration, coordination or 
joint decision making by competent national supe rvisory authorities from more than one 
Member State is required. In the event of a disagreement, and on request of one of the 
authorities concerned, th e ESAs can assist in finding a reso lution within a time limit set by the 
ESA which takes into account any relevant time limits in the sectoral legislation, and the 
urgency and complexity of the disagreement. In the event that such disagreement persists, the 
Authority can settle the matter as outlined in  the Regulation establishing the each Authority. 
In general, disagreements between supervis ors are intended to be fully covered by the 
regulation with no consequential changes to th e sectoral legislation required. However, in 
those areas where there is already some form  of non-binding mediation process possible, or 
where there are time limits for joint decisions  to be taken by one or more supervisors, 
amendments may be needed to ensure there is clarity over and minimum disruption to the 
process for reaching a joint decision, but also th at where necessary, the Authorities are able to 
resolve disagreements. The remainder of this section outlines those areas of sectoral legislation where changes may be needed. 
Banking 
The Capital Requirements Directive (CRD) requi res supervisors to cooperate closely with 
each other. In particular, they must provide  one another with any information which is 
essential or relevant for the exer cise of their supervisory tasks
23 or likely to facilitate 
supervision24. Planning and coordination of supervisor y activities by the co nsolidating (group) 
supervisor should be carried out in c ooperation with the supervisors involved.25  Supervisors 
are also required to have written coordi nation and cooperation a rrangements in place26 and are 
required to consult each other be fore taking a decision in a number of areas, including 
licensing and decisions regard ing major sanctions/measures27. Therefore, the disagreement 
settlement mechanism in the regulation esta blishing the European Banking Authority (EBA) 
will not require specific amendments to apply. There are also a number of areas where a clear joint decision making process involving more than  one supervisor already exist and for which 
amendments will be required to ensure the EB A, where necessary, is able to effectively 
resolve disagreements. These are discussed below. 
Determination of significant branches in the CRD (article 42a) 
The CRD as amended in 2009 requires that superv isors of all 'significant' branches may be 
invited to participate in the activities of  supervisory colleges, and receive specific 
information.  Home and host supervisors, and th e consolidated supervisor for banking groups, 
are required to do everything w ithin their power to reach a jo int decision on the determination 
of a significant branch. If no jo int decision is reached within two months, the host supervisor 
                                                
 
23 Article 132 in the context of banking group 
24 Article 42 in the context of home/host arrangements for branches 
25 Article 129(1) 
26 Articles 131 and 132 
27 Articles 15, 132 and 143 
 
EN 11   EN is able to take its ow n decision, taking into account any vi ews or reservations of the other 
authorities. 
Model Validation (article 129(2)) 
The CRD has introduced a joint de cision process for the purposes  of authorising the use of 
internal rating based system and internal models.  National supervisors must work together, in 
full consultation, to decide whether or not to  grant the permission following an application 
from the firm and to determine the terms and conditions, if any, to which such permission 
should be subject.  
National supervisors are required to do everything  within their power to  reach a joint decision 
on the application within six months. In the ab sence of a joint decision, the group supervisor 
may make its own decision. 
Group risk assessment in the CRD (article 129(3)) 
A key area of cooperation and joint decision ma king in the CRD is in the assessment of the 
adequacy of the overall group capital (in term s of the level and distribution, known as the 
'pillar II process') with respect to its financial situation and risk profile.  The CRD as amended 
in 2009 requires that the group supervisor and the supervisors of the group's subsidiaries do 
everything within their power to reach a joint decision  on the application of  the directive with 
respect to these matters to determine the adequa cy of the capital held by the group and to each 
entity within group.   
A joint decision is required to be taken within  4 months.  In the case of disagreement, the 
current Level 3 Committee (and in future the EBA)  can be consulted for a dvice.  At the end of 
the four month period, supervisors can take thei r own decisions within their respective fields 
of competence, but any deviation from th e advice of the Level 3 Committee must be 
explained. 
Additionally, Annex I of this paper includes a possible area for the authority to develop 
technical standards which will c over pillar II issues.  The furt her clarity and consistency of 
application of pillar II standards should mean  there is less scope for disagreement between 
supervisors, or where disagreements do occur, more scope for the Authority to resolve them 
with reference to existing standards. 
In each of the articles outlined above, an amendment is needed to ensure competent 
authorities make full use of the periods forese en in the joint decisi on making procedures to 
come to an agreement between them. If this fail s there exists the possibility for EBA to settle 
the matter as outlined in the Regulation esta blishing the Authority. The EBA's disagreement 
settlement mechanism would be tr iggered at the end of the time period stated in each of the 
above articles in the sectoral legislation, fo llowing a request from one of the supervisors 
involved.  In these situations, the time period stat ed in each of the article s would also count as 
the conciliation period envisaged in the EBA's disagreement settlement mechanism, and after that period the EBA would have one month to take a final decision.  Supervisors would be 
required to wait for and act in conformity with  the EBA's decision before issuing their final 
decisions to the firms involved. Finally, the am endment should clarify that once supervisors 
have issued their decisions; the matter can  no longer be referred to the EBA.   
 
EN 12   EN Insurance 
As for banking, the Solvency II di rective requires supervisors to cooperate with each other in 
a number of areas. Additionally, the Solvency II directive lays down a comprehensive approach to group supervision wh ich allocates tasks a nd responsibilities to  either the group 
supervisor or supervisors of i ndividual entities.  In  a number of areas supervisors are required 
to take decisions following consultation, coordi nation or cooperation with other supervisors 
and/or CEIOPS.
28  Therefore, the disagreement se ttlement mechanism of EIOPA will not 
require specific amendments to apply.  However,  there are also a number of areas where the 
Solvency II directive provides for an explicit procedure to be followed by supervisors who are 
required to do everything within their power to reach a joint decision on certain issues, and in 
certain cases the possibility ex ists to refer the matter to CE IOPS prior to taking a decision, 
outlined below. 
Group model approval  
Article 229 provides for the possibility for an in surance group to apply an internal model to 
calculate its solvency capital requirement (SCR ) across all of its European operations.  At 
present, following an application from the firm , supervisors have six (or eight) months to 
make a joint decision.  In the absence of a jo int decision, the group supervisor can take its 
own decision. 
Decision on the application of supervision of gr oup solvency for groups with centralised risk 
management 
Article 235 requires the supervisory authorities c oncerned to do everything within their power 
to reach a joint decision on the application mentioned above. In  the absence of a joint decision 
the group supervisor can take its own decision.  
Determination of the SCR of a subsidiary   
Article 236 requires the college of supervisors to  do everything within their power to reach an 
agreement on the proposals of th e solo supervisor on the SCR of  a subsidiary (e.g. to impose a 
capital add-on). The supervisory authority having authorised the subsidiary can take the final 
decision.  
Non-compliance with the SCR 
Article 238 requires the supervisors within the co llege to do everything w ithin their power to 
reach an agreement on the recovery plan and the measures to be taken in deteriorating 
financial conditions. The supervis ory authority having au thorised the subsidiary has the final 
say. 
Determination of the group supervisor 
The group supervisor plays a key role in coor dinating supervisory activities for the group and 
taking certain decisions.  Article 251 allows a ny supervisory authority to request a discussion 
                                                 
28 For example articles 211, 212, 213, 214, 218, 219,  225, 242, 248 and 249.  All article references are 
provisional pending finalisation of the text. 
 
EN 13   EN be opened as to whether the criteria used to determine who the group supervisor is are 
appropriate.  A joint decision is required to select a different  group supervisor within three 
months.  Following this, a consultation with  the level 3 Committee is possible and the 
deadline is extended by a further 3 months. 
In each of these articles, an amendment is need ed to ensure supervisors make full use of the 
periods foreseen in the joint decision maki ng/consultation procedures to come to an 
agreement between them. If this fails there exis ts the possibility for EIOPA to settle the matter 
as outlined in the Regulation establishing th e Authority. EIOPA's disagreement settlement 
mechanism would be triggered at the end of the time period stated in each of the above 
articles in the sectoral legisl ation, following a request from one of the supervisors involved.  
In these situations, the time period stated in  each of the articles would also count as the 
conciliation period envisaged in EIOPA's disagr eement settlement mechanism, and after that 
period EIOPA would have one month to take a fi nal decision.  Supervisors would be required 
to wait for and act in conformity with EIOPA d ecision before issuing th eir final decisions to 
the firms involved. Finally, the amendment should clarify that once supervisors have issued 
their decisions; the matter can no longer be referred to EIOPA.   
Securities 
As for banking and insurance, securities legi slation contains a nu mber of cooperation 
obligations.  For example, both MiFI D and UCITS require supervisors to  cooperate with each 
other whenever necessary for the purpose of ca rrying out their duties or making use of their 
powers whether set out in the directive or in national law.29  Additionally, there are no joint 
decision making processes in s ecurities legislation. Therefor e, the disagreem ent settlement 
mechanism of ESMA will not require  specific amendments to apply. 
                                                 
29 Article 56(1) in MiFID and 101 in UCITS 
 
EN 14   EN 4.  General amendments  
There are a number of areas where consequential  amendments which are common to most 
sectoral legislation and necessary for the directives to operate in the context of new authorities 
may possibly be needed.  This section outlines these areas. 
To discharge the current tasks of  the present Level 3 Committees 
In order to ensure that the new Authorities can continue to undertake th e current tasks of the 
level 3 Committees smoothly, in all of the directives listed above, the following references 
would need to be replaced: 
'Committee of European Banking Supervisors' with 'European Banking Authority' 'Committee of European Insurance and Occupati onal Pensions Supervisors' with 'European 
Insurance and Occupationa l Pensions Authority' 
'Committee of European Securities Regulator s' with 'European Securities and Markets 
Authority' 
Cooperation obligations and information sharing with the ESAs 
The new supervisory architecture will require national supervisory authorities to cooperate 
closely with the European Authorities. In  particular, they should receive sufficient 
information from the national supervisory authorities in order to be able to discharge their duties under the regulation. 
Where necessary, specific information sharing re quirements to facilitate the above will be set 
out in sectoral legislation.  However, in the va st majority of cases, it will not be possible to 
specify in legislation the exact type of inform ation that will be needed for the delivery of 
these tasks, not least because a number of them are situation and context dependent.  
Therefore amendments to the relevant legisl ation will clarify the obligations on national 
supervisors to provide the necessary informat ion for the discharge of the tasks of the 
authorities and appropriate information gateways to ensure there are no legal obstacles to the 
information sharing obligations included in th e Regulations establishing the Authorities. 
Interaction with third countries 
It is proposed that the ESAs be given an appropriate role with re gards to the dealing with third 
countries.  The two broad areas envisaged are ge neral interaction and cooperation agreements 
and assisting the Commission in preparing e quivalence decisions.  In terms of general 
interaction, amendments will be needed to allow the ESAs to conclude cooperation 
agreements with third countries and exchange  information where those third countries can 
provide guarantees of professional secrecy. 
List keeping and other amendments 
It is proposed that the ESAs will be given th e duty to establish, publish and regularly update 
registers and lists of financial actors in the Community, which is currently the duty of each 
national competent authority, e.g. to keep the regi ster of all investment firms according to Art 
5 (3) MiFID or the list of regulated ma rkets according to Art 47 MiFID. Having one 
 
EN 15   EN consolidated list or register for each categor y of financial actors in the Community may 
improve transparency and better refl ects the single financial market. 
Additionally, in the context of the reduction of  national options and discretions, forthcoming 
amendments to the Capital Requirements Dir ective could entrust the authority with the 
responsibility for assessing, monitoring and mapping external credit assessment institutions (ECAI), which are active in different Member States. 
 
EN 16   EN Annex I:  Possible areas for amendments to existing legislation concerning technical standards  
FINANCIAL CONGLOMERATES DIRECTIVE 
2002/87/EC 
Area Description Rationale 
Durable link 
criterion for identification - 
Article 2(11) The detection of relationships of the conglomerate with entities that may pose 
additional risks to the group, also otherwise than through a control- or ownership-relationship Currently no level playing field, nor legal certainty, in application 
of durable link criterion to detect participations 
Relevant competent authorities, i.e. 
membership of the 
core college - Article 2(17) The criteria for the determination of th e "relevant competen t authority", as 
different from the other "competent authorities" (all those who authorised one 
or more legal entities of the group) Determination of which supervisor may be invited to the core 
college is not clear, important for consistent approach across 
colleges 
Identification of a conglomerate by 
means of other criteria than balance 
sheet and solvency 
figures - Article 3(5) The basic identification method builds on two relative indicators and one 
absolute indicator: balance sheet ratios, solvency ratios, and balance sheet 
total. To enable the identification of other, less straightforward, complex and 
cross sectoral groups as financial conglo merates, also criteria such as income 
structure and off balance sheet activities may be used, but the legal provision 
does not prescribe how these alternative criteria should be applied Use of other criteria than balance sheet total and solvency figures 
for the identification of conglomera tes neither clear nor predictable 
Method of 
calculation of capital 
at conglomerate 
level - Article 6(2) There are two basic methods eligible for aggregating the capital figures of all 
the legal entities in a group and calculating available group capital, known as 
the consolidation method and the deduction-and-aggregation method, 
consistent with CRD and Solvency II. However, the inputs into these methods are not prescribed, leaving sc ope for significant variation Although the directive restricts the methods which can be used for 
the calculation of capital, many degrees of freedom remain, 
potentially causing unjustified different outcomes for similar 
conglomerates 
Supervision of risk 
concentrations - 
Article 7 The aspects which need to be checked by supervisors in order to detect 
whether the same risk adds up th roughout the financial conglomerate The directive allows for many approaches and potentially overlaps 
of supervision on risk concentrations within sector-silos. It is 
important to align application across directives applicable to conglomerates 
 
EN 17   EN Supervision of Intra 
group transactions - 
Article 8 The aspects which need to be checked by supervisors in order to detect 
whether risks in one part of the conglo merate may spread to or affect other 
parts of the conglomerate The directive allows for many approaches and potentially overlaps 
supervision on intra group transactions. It is important to align 
application across directives applicable to conglomerates 
Supervision on 
internal control 
mechanisms - 
Article 9 Supervision on internal control mechanisms, such as risk management and 
internal governance.  Closely related to elements in the supervisory review 
process, required by both  the CRD and Solvency II. As far as relevant for the cross s ectoral elements of conglomerates' 
risk management and internal co ntrol, need for alignment of 
application across directives applicable to conglomerates 
Appointment of 
coordinating 
supervisor - Article 
10 The coordinator is determined following several criteria but the directive 
provides flexibility in case the involved supervisors would favour a certain 
choice. Article 10 should be read combined with articles 11, 12 and 15 To limit the scope for disagr eement over who should be the 
coordinator of the supplementary supervision 
Tasks of 
coordinating 
supervisor - Article 11 The coordinator's tasks are clearly liste d but the directive does not prescribe 
how these tasks should be carried out. Article 11 should be read combined 
with articles 10, 12 and 15 Variation of practices and lack of clarity with respect to the 
application of the tasks listed can create uncertainty 
Information exchange 
requirements - Article 12 Supervisors on the same conglomerate are obliged to share information based 
on a prescribed list of items. Article 12 s hould be read combined with articles 
10, 11 and 15 Variation of practices and lack of clarity with respect to the 
application of the information exchange requirements, including 
for emergency situations 
Delegation of tasks - 
Article 15 
 Supervisors on the same conglomerate can decide to delegate verification 
tasks to each other. Article 15 should be read combined with articles 10, 11 
and 12 Variation of practices and lack of clarity with respect to the 
application of this provision 
 
EN 18   EN CAPITAL REQUIREMENTS DIRECTIVE  
2006/48/EC and 2006/49/EC30 
Area Description Rationale  
Pillar 2 – interest 
rate risk - Article 
150(2)(a) Specification of the size of sudden an d unexpected changes in the interest 
rates referred to in Article 124(5) Technical issue to strength en supervisory convergence 
Temporary changes  
to requirements - Article 150(2)(b) Temporary modification of the minimum level of own funds and/or the risk 
weights in order to take account of speci fic circumstances in view of ensuring 
financial stability.  This will also extend to temporary modification of the 
disclosure framework (Pillar 3) Flexibility required.  Technical standards would provide some 
flexibility to respond to financial stability developments 
Supervisory disclosure - Article 
150(2)(d) and (e) 
and Article 144 Framework for supervisory disclosure Technical issu e to strengthen supervisory convergence.  CEBS 
guidelines already exist in this area 
Authorisation - Article 6 Specification of requirements for a credit institution to be authorised in a 
Member State Technical issue to strength en supervisory convergence 
Prudential 
assessment of 
acquisitions - Article 19-21 Specifications of procedure, assessmen t criteria and information exchange 
when making a prudential assessment of an acquisition Technical/practical issue, to stre ngthen supervisory convergence.  
CEBS guidelines currently exist in this area 
Exercise of the passport - Articles 
25, 26, 28 Relates to the transmission of information between home and host authorities 
for the purpose of implementing the provisions relating to freedom to provide 
services/of establishment.  Practical issue.  Supervisors best  placed to deal with cooperation 
procedures.  CEBS guidelines are being developed in this area 
Information sharing List of information to be shared in the co ntext of home/host cooperation T echnical/practical issue, to stre ngthen supervisory convergence 
                                                 
30 Unless otherwise specified refere nces are to Directive 2006/48/EC 
 
EN 19   EN - Article 42  
Hybrid instruments - 
Article 63a(6) CEBS are required to produce guidelines on Tier 1 hybrid instruments under 
the amended CRD due to come into force in 2011 Technical issue, to streng then supervisory convergence 
Reporting – 
solvency and large exposures - Article 
74 and 110(2) CEBS are required to develop a uniform reporting (format, frequency and 
dates) to be applied by 2012 for credit institutions and investment firms' minimum capital requiremen ts and large exposures Technical issue, to streng then supervisory convergence 
 
Rating agencies 
(ECAI) – recognition - Article 
81(2) and 97 Standards regarding the recognition of ECAI's in relation to the credit rating 
agencies regulation Technical issue, to strengthen supervisory convergence, avoid 
duplication of work and reduce the burden of the recognition process where an ECAI is regist ered as a CRA. Further to the 
adoption of the CRA regulation, existing CEBS guidelines will 
need to be amended in this area  
Model validation – 
IRB system - Article 
84 Conditions under which supervisors permit credit institutions to use their own 
models for calculating credit risk – known as the IRB Approach 
Model validation – 
operational risk - 
Article 105 Conditions under which supervisors permit credit institutions to use their own 
models to calculate operational risk – known as Advanced Measurement 
Approaches Technical issues, to further sp ecify existing requirements to 
strengthen supervisory convergen ce. CEBS guidelines already exist 
in these areas 
 
Large exposures - 
Article 106(2), 113 CEBS are required in the amended CRD to clarify exemptions in points c) 
and d) relating to money transmission, and other exemptions provided in Article 113 Technical issue to strength en supervisory convergence 
Securitisation - 
Article 122a(10) Standards to specify due diligence and retention requirements for institutions 
involved in securitisation activity, in pa rticular regarding the measures that 
can be taken to deal w ith breaches of due diligence requirements. CEBS 
guidelines are required under the amended CRD Technical and practical issue to strengthen supervisory 
convergence 
Pillar 2 - Article 124, 129(3) Standards regarding the joint decision process for assessing a groups overall 
risk profile and capital requirements, and the application of Pillar 2 (internal 
capital adequacy assessment process, supervisory review process, and 
decision to require additional own fund s). Guidelines are required under the Practical issue.  Supervisors best  placed to deal with cooperation-
related issues, and group risk assessments 
 
EN 20   EN amended CRD 
Colleges - Article 
131a(2) Requires that operational functioning of Colleges of supervisors be based on 
written arrangements, underpinne d by CEBS guidelines  Practical issue.  Supervisors best  placed to deal with cooperation 
procedures 
Liquidity risk 
management - Annex V, points 15 
to 17 Standards relating to the application of certain principles relating to liquidity 
risk management 
Rating agencies (ECAI) – mapping - Annex VI, Part 2, 
points 12, 13 and 14 Standards regarding the mapping of ratings external ratings into risk weights.  
CEBS guidelines already exist in this area 
Model validation – market risk - Annex 
V of 2006/49/EC Conditions under which supervisors permit credit institutions to use internal 
models to calculate their market risk. This includes specification of the 
requirements regarding the validation of internal models for incremental risk 
and migration risk and specification of the calculation of the stressed value-at-risk Technical issues to strengthen su pervisory convergence in these 
areas 
 
 
EN 21   EN INSTITUTIONS FOR OCCUPATIONAL RETIREMENT PROVISION DIRECTIVE 
2003/41/EC 
Area Description Rationale  
Information to be 
provided to 
competent 
authorities - Article 13 There are persistent differences with regard to the amount of information that 
has to be submitted to the supervisory authority, as well as on the 
interval/frequency and the institution /party on which the reporting obligation 
lies Technical issue, to strengthen supervisory convergence.  Standards 
will enhance the level of tr ansparency and comparability 
 
 
 
Cross-border 
activities and 
cooperation between 
competent 
authorities - Article 21 The prudential requirements are supervised by the competent authorities of 
the home Member State, wh ile the national social and labour law relevant to 
the field of occupational pension schemes is supervised by the competent 
authorities of the host Member State. In practice, however, for cross-border 
activity as referred to in Article 20 it is difficult to know for each Member 
State which rules fall within the scope of prudential law and which rules fall 
within the scope of national social and labour law. This, in turn, acts as a 
barrier to cross-border business. Moreover, the cooperation between 
competent authorities as referred to in Article 21 should be facilitated The prudential matters refer to aspects dealt with in the Directive, 
such as the maximum interest rates or the biometric tables used. The 
technical standards should specify more clearly the rules falling 
under the mutual recognition principle and supervised by the 
competent authorities of the home Member State 
 
EN 22   EN SOLVENCY II 
The Solvency II directive is yet to be fina lised and therefore will not be included in the October package of legislative chang es described in the introduction 
Area Description Rationale  
Transparency and 
accountability of 
supervisory 
authorities - Article 30 (a)-(e) Supervisory authorities are accountable for how they enforce compliance with 
prudential regulations. Therefore, appropriate disclosure by supervisory 
authorities on supervisory approaches and their legal basis is necessary 
 Standards on the format and structure of the disclosures to further 
specify the key elements set out in the implementing measure could 
further improve transparency and accountability and strengthen 
supervisory convergence 
Supervisory reporting and public 
disclosure - Article 
35 and 55 Information to be provided by insurance and reinsurance undertakings to 
supervisory authorities and information to be disclosed to the public in the 
Solvency and Financial Condition report.  The public disclosure requirements 
aim to enhance market discipline and transparency Standards could contribute to enhanced convergence by further 
specifying the principles set out in level 2, in particular in relation to 
reporting and disclosure templates 
Prudential assessment of 
acquisitions
31 - 
Article 56-62 Specifications of procedure, assessment crite ria and information exchange Technical/practical issue.  To promote supervisory co nvergence 
Technical Provisions 
- Article 85 (a)-(h) Technical provisions are the main com ponent of an insurance undertakings' 
liabilities.  Implementing measures will be developed to underpin the 
valuation of technical provisions Standards which further specify the requirements set out at level 2 
could contribute to ensuring the necessary flexibility whilst at the 
same time maintaining a level playing field 
 
Own funds - Article 
92, article 97 and 
article  99 Eligible own funds are classified in to three tiers. The characteristics and 
criteria to do so need to be interpreted in the same way in order to ensure 
harmonisation Standards which further specify the principles set out at level 2 could 
contribute to ensuring the necessary flexibility whilst at the same 
time maintaining a level playing field 
Solvency Capital Requirement (SCR) 
- Article 109, 112 The SCR represents the level of capital insurers are expected to hold. Insurers 
will be able to use either the Standard Formula or an internal model to 
calculate the SCR. Implementing measures will be developed for both If the standard formula is to remain truly risk sensitive over time, it 
may need to be regularly reviewed and if necessary updated to 
ensure that its calibration remains appropriate. Given each internal 
                                                 
31 Directive 2007/44 
 
EN 23   EN and 125 methods 
 model will be tailored to the undertaking, it will also be difficult to 
be too prescriptive at level 2 par ticularly as practice is likely to 
evolve over time 
Information - Article 253 Information to be gathered and disseminated systematically by the group 
supervisor to other supervisory authorities or to be transmitted to the group supervisor by other supervisory authorities 
Disclosure - Article 
260 Information which must be disclosed and the means by which this is to be 
achieved as regards the single solvency and financial condition report The directive sets out the general principles and the future level 2 
measures could be complemented with standards in order to ensure the obligatory character of certain technical details such as the 
reporting and disclosure templates 
  
 
EN 24   EN INSURANCE MEDIATION DIRECTIVE  
2002/92/EC 
The IMD is currently under review and these issues will be covered  in its revision and the resulting legislative proposal due b y the end of 2010 
Area Description Rationale  
Professional 
indemnity insurance 
- Article 4(3) This requirement is part of the professional requirements for insurance 
intermediaries (IIM).  It obliges insurance and reinsurance IIM to hold 
Professional Indemnity Insurance covering the whole territory of the Community or some other comparable guarantee against liability arising from 
professional negligence, for at least EUR 1000000 applying to each claim and 
in aggregate EUR 1500000 per year for a ll claims (certain exemptions to this 
rule are contained further in the article) The amounts are subject to regular review. Technical standards 
might establish a mechanism for carrying out these updates and 
consequently introduce a higher cl arity for (especially) supervisory 
purposes, including the precision of methods of calculation 
Information provision - Art. 12(1), (2) and (3). 
Additional legal 
basis: Art. 13 on information 
conditions Art. 12 contains a list of (minimum) information to be provided by the IIM to 
the customer prior to the conclusion of any initial insurance contract, and if necessary, upon amendment or renewal thereof 
 The current Art. 12 will be thorough ly reviewed during the prepared 
revision of the IMD as the current minimum harmonisation does not represent the necessary guarantee fo r effective consumer protection. 
Technical standards in this ar ea might further strengthen the 
harmonisation of these standards across the Single Market 
 
EN 25   EN TRANSPARENCY DIRECTIVE 
2004/109/EC 
Area Description Rationale  
Notification of 
major holding of 
voting rights - 
Article 12(8)(a), 13(2)(c) Standard form for the notification of major holdings of voting rights and of 
financial instruments giving access to voting rights 
Standards could establish a standard form to be used throughout the 
Community when notifying required information on holdings of voting rights to the issuer and when filing this in formation with the competent authority Relates to practical implementation of provisions of the Directive 
which is best left to supervisors. Standards could strengthen 
supervisory convergence 
Supervisory 
convergence - 
Article 24(4)  
 Standards as regards supervisory pr actices and exercise by competent 
authorities of their powers in order to ensure compliance with directive's 
obligations. Relates to the coordination and co nsistent exercise by competent 
authorities of their powers. This is an area where CESR already can 
adopt non-binding guidelines. However, standards in future could 
strengthen convergence. 
 
EN 26   EN MARKETS IN FINANCIAL INSTRUMENTS DIRECTIVE 
2004/39/EC 
Area Description Rationale  
Requirements for 
authorisation - Art., 
7, 9, 10, 12  MiFID sets out various requirements that must be met before an investment 
firm can be authorised Technical Standards specifyi ng certain requirements for 
authorisation (e.g. the 'fit and proper' requirement) could help to 
ensure uniform application of authorisation process and strengthen 
convergence 
Prudential assessment of 
acquisitions - 
Articles 10- 10b  Specifications of procedure, assessmen t criteria and information exchange 
[There is currently 3L3 guidance on cross border mergers and acquisitions] Technical/practical issue.  To fu rther specify existing requirements 
to promote supervisory convergence 
Information 
exchange - Art 56-
58, 60  Requires supervisory authorities to coope rate with each other.  Standards 
could encompass templates to facilitate cooperation/information exchange 
between home andhost (e.g. such as the standard notification template referred to above)  
 Supervisors may benefit from a mo re standardised process.  Will 
also strengthen convergence 
 
 
 
EN 27   EN MARKET ABUSE DIRECTIVE 
2003/6/EC 
Area Description Rationale  
Information 
exchange - Art. 16  Under the MAD regime, supervisory co-operation – a prerequisite for 
effective cross-border enforcement – is  expected to take place by way of 
exchanging information, alerting about suspected abuses and acting upon 
such notifications, seeking and offering assistance as well as collaborating in investigations and inspections. Templates/standards could facilitate 
cooperation/information exchange between supervisors (e.g. standard 
notification template) Competent authorities are likely to engage more willingly and more 
effectively into supervisory co-operation if some of the co-operation 
aspects are standardised and/or formalised.  
 
 
EN 28   EN PROSPECTUS DIRECTIVE 
2003/71/EC 
Area Description Rationale  
Cooperation 
between authorities - 
Art. 22.2  Obligation of the competent authorities to exchange information and 
cooperate with each other.  Standards could facilitate information 
exchange/cooperation between home/host   Supervisors may benefit from a mo re standardised process.  Will 
also strengthen supervisory convergence 
 
 
EN 29   EN UNDERTAKINGS FOR COLLECTIVE INVESTMENT IN TRANSFERABLE SECURITIES DIRECTIVE 
85/611/EEC (work on level 2 implementing measures is ongoing. The Commission intends to adopt the measures by 1 July 2010)  
Area Description Rationale  
Content of the 
application for the 
authorisation of 
UCITS. – Art. 5(8) The UCITS Directive requires UCITS to be authorised by its home competent 
authority. The authority has to approve (i) the application of the management 
company to manage a common fund (o r the investment company, where 
relevant), (ii) the fund rules or the in struments of incorporation, and (iii) the 
choice of the depositary. Once a UCITS is  authorised in one Member State, it 
can market its units in another Member State – subject to the notification 
procedure of Article 93 – without going again through the same process of authorisation.  Since UCITS benefit from the EU "passport", the authorisation 
process should be consistent throughout the Community. 
Competent authorities should require similar documentation, no 
matter in which Member State the authorisation is filed. In order to develop consistent supervisor y practices and to ensure legal 
certainty, standards could specify  the precise information that 
promoter of a UCITS has to submit to competent authorities to get the authorisation. 
Conditions for the authorisation of the management 
company and the 
investment company. – Arts. 
7(6) and 29(5) 
 UCITS management company and the self-managed investment company 
have to meet the conditions required by the Directive in order to be authorised. Once authorised, both entities can operate on a cross border basis. Since both entities benefit from a "passport" in the EU, the 
competent authorities should interpret these conditions in a consistent way. In order to develop consistent supervisory 
practices and to ensure legal certainty, standards could further 
specify the information to be provided in the application for the authorisation, the content of the programme of activities and 
operations and the description of the organisational requirements 
and conduct of business rules. In addition, the standards could further specify the criteria for assessing the suitability of the 
persons conducting the business and of qualified shareholders. 
Organisational 
requirements to minimise conflicts 
of interests – 
Art.12(3) Management companies are required to adhere to some minimum prudential 
and organisational requirements.  Level 2 provisions will set out the requirements in more detail.   Technical standards could further specify level 2 provisions to 
contribute to a common understanding and consistent application of the rules on organisational arrangements on internal control 
functions, complaints handling, personal transactions, electronic 
data processing, record keeping, accounting and organisational arrangements for minimising conflicts of interest. 
Rules of conduct  for 
management 
companies – Art UCITS Directive requires management companies to (i) act honestly, fairly 
and with due skill, care and diligence in the best interest of the UCITS; (ii) 
employ its resources effectively and performs its business activities properly; 
(iii) identify, pr event, manage or disclose conflic ts of interests. These general In order to promote the common understanding and consistent 
application of conduct of business rules, technical standards could 
complement level 2 measures by further specifying due diligence requirements and criteria for identif ying and managing conflicts of 
 
EN 30   EN 14(2) principles will be complemented be Level 2 implementing legislation. interest. 
Merger of UCITS - 
information to be 
provided to unit-holders - Art. 43(5) UCITS involved in a merger have to provide their unit-holders with 
appropriate information (listed in Article 43(3)) about the merger, so that 
investors can make an informed judgem ent in advance of the operation. The 
specification of the content, format and method for providing the information 
will be implemented at level 2.  In order to strengthen supervisory convergence and to promote the 
same level of investor protection in the Community, technical 
standards could clarify certain el ements related to the content, 
format and method of delivery of the information. 
Clarification of UCITS investment criteria as referred to 
in Article 50 – Art. 
50(4) 
 Article 50 of the Directive enumerates the categories of assets that UCITS 
can acquire and criteria according to whic h UCITS can invest. It is essential 
that UCITS and the competent authorities share a common understanding of 
the investment criteria of UCITS. Due to the constant innovation in the 
financial sector, new financial instruments are very often launched in the 
financial markets and traditional assets are further developed or present new 
features.  In order to ensure consistent supervisory practices throughout the 
Community and respond to market innovation, standards could provide for a common understanding of the investment criteria of 
UCITS. Standards would represent the technical specifications of 
the categories of assets and criteria enumerated in Article 50 of the 
Directive and would not modify the content or scope of such 
Article. 
Criteria for assessing the adequacy of the risk management 
process employed by 
a management company – Art. 
51(1) and 51(4) The risk management requirements laid down in the UCITS Directive will be 
further developed at Level 2. Level 2 measures should define the main principles governing the risk management process, in particular (i) the 
organisational arrangements, (ii) requirements on risk measurement that will 
allow fund managers to identify and manage properly the risk, (iii) report on derivative instruments.  In order to develop a common supervisory approach to risk 
management built on mutual trust between supervisors and to ensure a high standard of investor protection, technical standards 
could further specify technical aspects of risk management 
process. Technical standards would ensure the flexibility necessary to react to market developments and address particular 
cases or situations. Technical standards can further specify the 
requirements for the risk-measur ement process and the content, 
form and frequency of communications to the management 
company's home Member State re quired under article 51(1).  
Master-feeder 
structures – Arts. 60(6),  61(3)(a) and 
(b), 62(4),  and 
64(4)(a) and (b) The recast of UCITS Directive has introduced a new and detailed legal 
framework for master-feeder structures. The Commission will adopt implementing measures specifying the re gime applicable to master-feeder 
structures. In order to strengthen supervisory convergence as well as be able 
to respond to market developments, technical standards could further specify elements of the level 2 implementing measures on 
the relationship between master and feeder UCITS and their 
depositaries and format and process for providing information. 
Specification of the content and format 
of the prospectus, 
the annual report UCITS have to keep investors and markets periodically informed by 
publishing a prospectus, an annual report and a half-yearly report. The 
information items that should be displayed in these documents are listed in 
Annex I of the Directive. Where a UC ITS is marketed in a host Member In order to ensure the same level of investors' protection 
throughout the Community and to promote consistent supervisory 
practices, standards could further sp ecify the content and format of 
the prospectus, the annu al report and the half-yearly report and the 
 
EN 31   EN and the half-yearly 
report – Art. 69(2) 
and (3) and Art. 73 State, investors should receive these documents in the way prescribed by the 
laws of that host Member State. He nce, the different competent authorities 
should interpret in the same way the information requirements. In particular, competent authorities should share a common understanding of the 
accounting requirements for UCITS. accounting obligations for UCITS. They will consist of technical 
clarifications of the elements list ed in Annex I of the Directive.  
 
Key investor 
information (KII) – Art 78 The manager of UCITS is obliged to draw up a short document containing 
key investor information (KII). The KII shall include appropriate information about the essential character istics of the UCITS, so that investors can make 
informed investment decision and can understand the nature and the risk 
related to investment in a UCITS. Level 2 measures will define the detailed content and form of the KII.  Technical standards could usefully complement these definitions, 
contributing to common understanding and consistent application of provisions, in particular to the preparation, presentation and 
calculation of the information to be provided in the KII. Such 
standards would contribute to ensure a consistent level of investor protection throughout the Community. 
Conditions for suspending the re-purchase or the 
redemption of the 
units of UCITS – art. 84 UCITS are obliged to repurchase or to re deem their units at the request of any 
unit-holder. In exceptional cases, if justified, a UCITS may temporarily suspend the repurchase or redemption of its units, taking into account the 
interests of the unit-holders. The UCITS should inform without delay the 
supervisors of the Member Stat es where it markets its units. In order to ensure the same level of investor protection and 
consistent supervisory practices throughout the Community, standards could further specify the conditions for the temporary 
suspension of the re-purchase or redemption of the units decided 
by the UCITS. 
Notification of  
marketing of UCITS 
in host Member States – Art. 95 When a UCITS intends to market its units in a host Member State it must 
inform the competent authorities of its home Member State by submitting a 
notification letter. The process of the cr oss-border marketing of units involves 
the competent authorities of both UCITS home and host Member States. The 
notification letter is a piece of informa tion addressed to competent authorities. In order to promote an efficient cooperation between supervisors, 
standards could further specify technical arrangements of this 
obligation, in particular the form and content of the notification and the attestation, conditions for the electronic transmission of 
documentation and cooperation between supervisors.  
Procedures for 
exchange of information between 
authorities and on-
the-spot verifications and 
investigations – Art. 
105 and 101(9) The exchange of information between home and host authorities is crucial in 
order to allow supervisors to discharge their duties properly in relation to the cross-border activity of UCITS and their managers. Standards and procedures 
for handling requests for information should be defined in a consistent 
manner and the exchange of information should be subject to the confidentiality rules of Articles 102 to 104 of the Directive. In addition, 
UCITS Directive requires competent authorities to cooperate among them 
when needed to carry out on-the-spot verifications and investigations. Standards may further specify th e procedures for exchange of 
information between competent authorities in order to organise an efficient and adequate information flow. In addition, in order to 
ensure consistent supervisory practices throughout the Community 
and to develop an efficient co operation between the competent 
authorities, technical standards c ould further specify the practical 
arrangements for cooperation between supervisors when carrying 
out on-the-spot verifications and investigations. These provisions are of direct concern to supervisors 
 
EN 32   EN CRA Regulation 
 
Area Description Rationale/explanation  
Registration process, including on 
the information set out in Annex II, 
and language regime for applications submitted to the 
ESMA - Art. 21(2)(a) empowering 
provision
32 CRAs are required to submit their applica tions for registration including necessary 
information set out in Annex II. Further in the registration process they may be required 
to provide additional information and documents to support their application for registration.  Technical issue which could strengthen 
convergence, expertise with supervisors 
 
Information that the credit rating 
agency must provide for the 
application for certification and for the assessment of its systemic 
importance to the financial stability 
or integrity of financial markets referred to in Article 5 - Art. 
21(3)(d) empowering provision
33 A CRA from a 3rd country that seeks to operate under the certification regime is 
proposed to register with the ESMA.  The ESMA may take a decision on registration 
only after it establishes that specific conditions are met, on the basis of information provided by the overseas CRA in accordan ce with Article 5. Not being of systemic 
importance to the financial stability or integrity of financial markets is one of the 
preconditions for such certification.  Technical issue which could strengthen 
convergence, expertise with supervisors 
 
Presentation of the information, 
including structure, format, method and period of reporting, that credit 
rating agencies shall disclose in 
accordance with Article 11(2) and point 1 of Part II of Section E of 
Annex I - Art. 21(2)(d) 
empowering provision
34 A CRA to make available in a central repository established by CESR information on its 
historical performance data including the ratings transition frequency and information about credit ratings issued in the past and on  their changes. In future, ESMA could make 
that information accessible to the public a nd shall publish summary information on the 
main developments observed on an annual basis. (Art. 11(2), Annex I.E.II.1) Technical issue which could strengthen 
convergence, expertise with supervisors 
 
                                                 
32 Under existing text of the CRA Regulation to be developed as guidance by CESR 
33 Under existing text of the CRA Regulation to be developed as guidance by CESR 
34 Under existing text of the CRA Regulation to be developed as guidance by CESR 
 
EN 33   EN ANTI MONEY LAUNDERING DIRECTIVE 
2005/60/EC 
Area Description Rationale/explanation  
AML consolidated 
group approach - 
Article 31(1) + 34(2) Sets out the high level principle re quiring EU financial institutions to 
establish adequate and appropriate policies and procedures of customer due 
diligence, reporting, record keeping, internal control, risk assessment, risk 
management, compliance management and communication equivalent to those defined by the Directive in their branches and majority-owned 
subsidiaries located in third countries. Non-cooperative countries and 
jurisdictions constitute a specific subset of third countries that deserve peculiar attention. Technical standards could be developed to establish minimum 
criteria and practices for the su pervision of compliance by EU 
credit and financial institutions with AML consolidated group 
approach and the "know-your-structure" principle in Articles 31(1) and 34(2) in connection with non-cooperative countries and 
jurisdictions 
 
Supervisory 
convergence - 
Article 37 Standards as regards  supervisory practices and exercise by competent 
authorities of their powers in order to ensure compliance with the directive's 
obligations 
 Relates to the coordination and consistent exercise by competent 
authorities of their powers. In th is area, CESR already can adopt 
non-binding guidelines. However, binding standards may be needed in future in this area  to strengthen convergence.