EUROPEAN COMMISSION Brussels, 12.9.2018 COM(2018) 646 final 2017/0230(COD) Amended proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) No 1093/2010 establishing a European Supervisory Authority (European Banking Authority); Regulation (EU) No 1094/2010 establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority); Regulation (EU) No 1095/2010 establishing a European Supervisory Authority (European Securities and Markets Authority); Regulation (EU) No 345/2013 on European venture capital funds; Regulation (EU) No 346/2013 on European social entrepreneurship funds; Regulation (EU) No 600/2014 on markets in financial instruments; Regulation (EU) 2015/760 on European long-term investment funds; Regulation (EU) 2016/1011 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds; Regulation (EU) 2017/1129 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market; and (EU) Directive 2015/849 on the prevention of the use of the financial system for the purposes of money-laundering or terrorist financing (Text with EEA relevance)



EXPLANATORY MEMORANDUM 1.CONTEXT OF THE PROPOSAL •Reasons for and objectives of the proposal The September 2017 Commission proposal to review the European Supervisory Authorities' Regulations (hereafter the " Review Proposal") intends to strengthen their capacity to ensure convergent and effective financial supervision, but it does not pursue the specific objective of reinforcing the mandate of the Authorities in matters relating to the preventing and combating of money laundering and terrorist financing. Despite the strengthened legislative framework in this area, several recent cases of money-laundering in European banks have shown that improvements may still be warranted in the Union's supervisory framework to strengthen the confidence in the Banking and Capital Markets Unions. These improvements need to be implemented swiftly and in a determined way. The most efficient way of dealing with this matter is to amend the Review Proposal and strengthen decisively the role of the European Banking Authority in particular. The Commission calls on the legislators to adopt these new amendments, together with the Review Proposal, as rapidly as possible. The objectives of this amending proposal are the following: 1) to optimise the use of expertise and resources dedicated by centralising tasks related to preventing and combating money-laundering and terrorist financing at the European Banking Authority; 2) to clarify the scope and content of the anti-money-laundering related tasks entrusted to the European Banking Authority; 3) to reinforce the tools for carrying out anti-money laundering tasks; 4) to strengthen the coordination role of the European Banking Authority for international anti-money laundering issues. To this end, it is proposed to give a leading and coordinating role to the European Banking Authority in order to centralise resources currently scattered across the three European Supervisory Authorities and give it a more robust support structure, also given that it is in the banking sector that money laundering and terrorist financing risks are most likely to have systemic impact. On the basis of existing tools and powers of the Authorities as amended by the pending Review Proposal, it is proposed to give the European Banking Authority a more explicit and comprehensive mandate to ensure that risks of money-laundering and terrorist financing in the Union's financial system are effectively and consistently incorporated into the supervisory strategies and practices of all relevant authorities. The European Banking Authority will also be able to request competent authorities to investigate possible breaches of the relevant rules and to oversee national procedures in this area. Under specific, circumscribed circumstances it will be able to address decisions directly to individual financial sector operators with regard to money-laundering matters and engage in binding mediation between national competent authorities on such matters. • Consistency with existing policy provisions in the policy area This amending proposal is consistent with the Commission's on-going efforts to strengthen the Union's framework for financial supervision, develop the Capital Markets Union and to combat money-laundering and terrorist financing. 2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY •Legal basis The legal basis for all amendments presented in this proposal is Article 114 of the Treaty on the Functioning of the European Union ("TFEU"). •Subsidiarity (for non-exclusive competence) Because the European Supervisory Authorities are Union bodies, their governing regulations can only be amended by the Union legislator. Moreover, the objective of this proposal is to improve the effectiveness of supervision, foster cooperation among competent authorities and to optimise the use of expertise and resources at Union level in matters related to risks of money-laundering and terrorist financing. This will ensure a more consistent and effective functioning of the internal market, an objective which cannot be reached by Member States acting individually. •Proportionality The amendments presented in this proposal constitute targeted changes to improve the Union's supervisory framework, which do not go beyond what is necessary for attaining the objectives set out therein. The proposed amendments will contribute to improving the integrity, stability and effectiveness of the financial system throughout the Union.

•Choice of the instrument This proposal amends the pending Review Proposal. It amends the Regulations governing the three European Supervisory Authorities and the Directive on the prevention of the use of the financial system for the purposes of money-laundering or terrorist financing and takes the form of a Regulation. 3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS •Collection and use of expertise This proposal takes into account reflections of the Joint Working Group composed of the chairpersons of the European Supervisory Authorities, the chairperson of the Supervisory Board of the Single Supervisory Mechanism, the chairperson of the Joint Committee's anti-money laundering sub-committee and the Commission, as well as exchanges with relevant stakeholders. •Impact assessment Given the urgent need to preserve and safeguard the European banking system from potentially damaging money-laundering cases, this initiative was prepared without an impact assessment or public consultation, but using the practical experience and expertise underpinning the Reflection Paper mentioned above. •Regulatory fitness and simplification This is a targeted amendment of the Union framework for prudential and anti-money laundering supervision of financial institutions and financial market participants to centralise the tasks of the European Supervisory Authorities related to preventing and combating money-laundering and terrorist financing in the financial sector at the European Banking Authority and to reinforce the tools for carrying out anti-money laundering tasks and coordination. The amendments should make Union level supervision more effective and efficient and will improve legal and economic certainty. This is in line with the Commission's Better Regulation Agenda. •Fundamental rights This proposal respects the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union. 4.BUDGETARY IMPLICATIONS The financial and budgetary impact of this proposal is explained in detail in the supplementary legislative financial statement at the end of this proposal. 5.OTHER ELEMENTS •Implementation plans and monitoring, evaluation and reporting arrangements The implementation of this Regulation will be reviewed as part of the regular reviews of the Authorities framework every three years. •Detailed explanation of the specific provisions of the proposal Enhancing the role of the European Banking Authority The proposed amendments to Article 1(2) extend the scope of action of the European Banking Authority in a targeted way, to incorporate into the European Banking Authority's mandate matters related to combating money-laundering and terrorist financing across the financial sector, to supplement its existing mandate in the banking sector. The proposed amendments to Article 4(2) ensure a dedicated definition of financial sector operators which include all relevant financial institutions subject to Directive 2015/849, including those within the remit of Regulation (EU) No 1094/2010 and Regulation (EU) No 1095/2010.

The proposed Article 8(1)(l) emphasises the specific importance attributed to the European Banking Authority's work in relation to combating money-laundering and terrorist financing. The proposed new Article 9a provides the European Banking Authority with strengthened tools to promote consistent, systematic and effective action in the area of preventing and combating money-laundering and terrorist financing in the Union's financial system. In particular, it empowers the European Banking Authority to collect information relating to weaknesses identified in the processes and procedures, governance, business model and activities of financial institutions to prevent money-laundering and terrorist financing, as well as measures taken by competent authorities and make that information available to relevant competent authorities as appropriate. It also puts emphasis on the importance of conducting reviews of competent authorities, as well as carrying out risk assessment exercises to test competent authorities' strategies and resources in relation to money-laundering and terrorist financing risks. The proposed Article also foresees a role for the European Banking Authority to cooperate and liaise with relevant third country anti-money laundering supervisors with a view to better coordinating action at Union level in material cases of money-laundering or terrorism financing with a third country dimension. Finally, the proposed Article foresees that coordination and cooperation issues relating to anti-money laundering and terrorist financing takes place through an Anti-Money Laundering Committee integrated into the European Banking Authority. It will be composed of heads of Member States authorities and bodies competent for ensuring compliance by financial institutions with the requirements of Directive 2015/849/EU, and observers from the European Insurance and Occupational Pensions Authority, the European Securities and Markets Authority, the European Systemic Risk Board, the European Commission and from the Supervisory Board of the European Central Bank. The proposed Article 9b aims to reinforce the capacity of the European Banking Authority to ensure the effectiveness of Union law in the area of preventing and combating money laundering and terrorism financing. It gives the Authority the power, where it has indications of material breaches, to request competent authorities to start investigations on possible breaches of relevant rules, and consider taking decisions and imposing sanctions on financial sector operators. Changes put forward to Article 17 on the procedure for breach of Union law and Article 19 on the procedure for binding mediation, envisage enabling the European Banking Authority in the context of its tasks related to preventing and combating money laundering and terrorism financing, to take individual decisions addressed to financial sector operators even when the material rules are not directly applicable to such financial sector operators. This will include material rules enshrined in national legislation transposing Directives, as well as national legislation exercising options granted to Member States in Regulations. The proposed amendments to Article 54 clarify that the Joint Committee of the three Supervisory Authorities serves as a forum of cooperation among the three Authorities on matters related to the interaction between prudential and anti-money laundering aspects. The proposed amendments to the Regulation governing the European Insurance and Occupational Pensions Authority and the Regulation governing the European Securities and Markets Authority remove Directive 2015/849 on the prevention of the use of the financial system for the purposes of money-laundering or terrorist financing from the scope of activities of those two authorities and clarify that the Joint Committee should be used as a forum for cooperation on matters related to the interaction between prudential, and anti-money laundering andcountering financing of terrorism aspects. The proposal also includes minor amendments to Directive 2015/849 on the prevention of the use of the financial system for the purposes of money-laundering or terrorist financing to substitute references to the European Supervisory Authorities with a reference to the European Banking Authority. These are technical amendments to ensure coherence with the proposed new role proposed for the latter. 2017/0230 (COD) Amended proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) No 1093/2010 establishing a European Supervisory Authority (European Banking Authority); Regulation (EU) No 1094/2010 establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority); Regulation (EU) No 1095/2010 establishing a European Supervisory Authority (European Securities and Markets Authority); Regulation (EU) No 345/2013 on European venture capital funds; Regulation (EU) No 346/2013 on European social entrepreneurship funds; Regulation (EU) No 600/2014 on markets in financial instruments; Regulation (EU) 2015/760 on European long-term investment funds; Regulation (EU) 2016/1011 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds; Regulation (EU) 2017/1129 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market; and (EU) Directive 2015/849 on the prevention of the use of the financial system for the purposes of money-laundering or terrorist financing (Text with EEA relevance) THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof, Having regard to the proposal from the European Commission, After transmission of the draft legislative act to the national parliaments, Having regard to the opinion of the European Central Bank, Having regard to the opinion of the European Economic and Social Committee,

Acting in accordance with the ordinary legislative procedure, Whereas: (1)Following the financial crisis and the recommendations of a group of high level experts led by Jacques de Larosière, the the Union has made important progress in creating not only stronger, but also more harmonised rules for the financial markets in the form of the Single Rule Book. The Union has also set up the European System of Financial Supervision ("ESFS"), built on a two-pillar system which combines micro-prudential supervision, coordinated by European Supervisory Authorities ("ESAs"), and macro-prudential supervision through the establishment of the European Systemic Risk Board ("ESRB"). The three ESAs namely the European Banking Authority ("EBA"), created by Regulation (EU) No 1093/2010 of the European Parliament and of the Council, the European Insurance and Occupational Pensions Authority ("EIOPA"), created by Regulation (EU) No 1094/2010 of the European Parliament and of the Council , and the European Securities and Markets Authority (ESMA), created by Regulation (EU) No 1095/2010 of the European Parliament and of the Council (collectively "the founding regulations") – became operational in January 2011. The overall objective of the ESAs is to sustainably reinforce the stability and effectiveness of the financial system throughout the Union and to enhance consumer and investor protection. (2)The ESAs have made a crucial contribution to the harmonisaton of the rules of the financial markets in the Union by providing the Commission with input for its initiatives for regulations and directives adopted by Council and Parliament. The ESA's have also provided the Commission with drafts of detailed technical rules which have been adopted as delegated and implementing acts. (3)The ESAs have also contributed to the convergence in financial supervision. And supervisory practise in the Union by means of guidelines directed at competant authorities and by coordinating reviews of supervisory practices. However, the decision making processes enshrined in their founding regulations, in addition to constraints on resources and the nature of those instruments, which the ESAs have at their disposal, have prevented them from fully achieving their overall objectives. (4)After seven years of operation and following evaluations and the public consultations undertaken by the Commission it appears that the ESAs are increasingly constrained in their capacity to meet their objectives of the further integration of financial markets and services and the enhancement of consumer protection, within the existing legislative framework, both in the Union and between the Union and third countries. (5)Any enhanced powers to be afforded to the ESAs, to enable them to meet those objectives, would also require both appropriate governance and sufficient funding. Enhanced powers alone would not be sufficient to achieve the ESAs' objectives where they do not have sufficient funding or where they are not governed in an effective and efficient manner. (6)In the Commission's Communication of 8 June 2017 on the mid-term review of the Capital Markets Union Action Plan, it was emphasised that a more effective and consistent supervision of financial markets and services is pivotal for the elimination of regulatory arbitrage between Member States, when exercising their supervisory tasks, for the acceleration of market integration and for the creation of single market opportunities for financial entities and investors. (7)Further progress in supervisory integration is therefore particularly urgent to complete the Capital Markets Union. Ten years after the onset of the financial crisis and the establishment of the new supervisory system, financial services and the Capital Markets Union will be increasingly driven by two major developments: sustainable finance and technological innovation. Both have the potential to transform financial services and our system of financial supervision should be equiped for them. (8)It is therefore crucial that the financial system plays its full part in meeting critical sustainability challenges. This will require a deep re-engineering of the financial system to which the ESAs should make an active contribution starting with reforms to create the right regulatory and supervisory framework to mobilise and orient private capital flows towards sustainable investments. (9)The ESAs should play an important role in identifying and reporting risks that environmental, social and governance factors pose to financial stability, and in rendering financial markets activity more consistent with sustainability objectives. The ESAs should provide guidance on how sustainability considerations can be effectively embodied in relevant EU financial legislation, and promote coherent implementation of these provisions upon adoption. (10)Technological innovation has had an increasing impact on the financial sector and competent authorities have therefore taken various initiatives to deal with those technological developments. In order to promote better supervisory convergence and to exchange best practices between relevant authorities on the one hand, and between relevant authorities and financial institutions or financial market participants on the other hand, the role of the ESAs with regard to their oversight function and supervisory coordination should be strengthened. (11)Technological advancements in financial markets can improve financial inclusion provide access to finance, enhance market integrity and operational efficiency and also lower barriers to entry in those markets. To the extent relevant for the applicable substantive rules, training of competent authorities should also extend to technological innovation.. This should contribute to avoiding that Member States develop divergent approaches in these matters. (11a) It is becoming increasingly important to promote consistent, systematic and effective monitoring and assessment of risks in relation to money-laundering and terrorist financing in the Union's financial system. Given the consequences for financial stability which may stem from abuses of the financial sector for money-laundering or terrorist financing purposes, and building on the experience already gained by EBA in protecting the banking sector from such abuses, EBA should take a leading role at Union level to protect the financial system from money-laundering and terrorist financing risks. Therefore, it is necessary to entrust EBA, in addition to its present competences, with the authority to act within the remit of Regulation (EU) No 1094/2010 and Regulation (EU) No 1095/2010 insofar as such authority relates to the prevention and combating of money-laundering and terrorist financing, where it concerns financial sector operators and the competent authorities supervising them, which are covered by those Regulations. Moreover, concentrating this mandate for the entire financial sector within EBA would optimise the use of its expertise and resources, and is without prejudice to the material obligations laid down in Directive (EU) 2015/849. (11b) In order for EBA to exercise its mandate effectively it should make full use of all its powers and tools under the Regulation. In line with its new role, it is important that EBA collects all relevant information in relation to money-laundering and terrorist financing activities identified by the relevant Union and national authorities, without prejudice to the tasks assigned to authorities under Directive (EU) 2015/849. EBA should store such information in a centralised database and foster cooperation among authorities by ensuring appropriate dissemination of relevant information. In addition EBA should carry out reviews of competent authorities, as well as risk assessment exercises relating to money-laundering and terrorist financing. Furthermore, EBA should also have a role cooperating and liaising with relevant third country authorities on these matters with a view to better coordinate action at Union level in material cases of anti-money laundering and terrorist financing having a cross-border and third country dimension. (11c) In order to enhance the effectiveness of supervisory control of compliance in the area of money laundering and terrorist financing and to ensure greater coordination of the enforcement by national competent authorities of breaches of directly applicable Union law or its national transposing measures, EBA should have the power, where there are indications of material breaches, to request competent authorities to investigate any possible breaches of the relevant rules, to consider taking decisions and imposing sanctions addressed to financial institutions requiring them to comply with their legal obligations. This power should only be used where EBA has indications of material breaches. (12)A number of national authorities are not defined as competent authorities under the founding regulations, yet they are empowered to ensure the application of Union legislation in the area of financial services and markets. In order to ensure consistent, efficient and effective supervisory practices within the ESFS, it is necessary to define them as such. This would allow the ESAs notably to issue guidelines and recommendation to those national authorities. (13)In order to ensure appropriate safeguards for the stakeholders' interests where the ESAs exercise their competence to issue guidelines or recommendations, the various Stakeholder Groups should be able to issue an opinion where two thirds of their members consider that the ESA concerned has exceeded its competence. In that instance, the Commission should have the authority to require the ESA, after a proper assessment, to withdraw those guidelines or recommendations as appropriate. (14)In addition, for the purpose of the procedure provided for in Article 17 of the founding regulations and in the interest of proper application of Union law, it is appropriate to ease and speed up the ESAs' access to information. They should therefore be enabled to request information directly, via a duly justified and reasoned request, from all competent authorities concerned, financial institutions and financial market participants, even where those authorities, institutions or market participants have not themselves violated any provision of Union law. The ESAs should inform the competent authority concerned of such requests and that competent authority should assist the ESAs in collecting the requested information. (15)A harmonised supervision of the financial sector requires a consistent approach among competent authorities. To that end, the activities of the competent authorities should be subject to regular and independent reviews by the ESAs, which should be supported by a review committee established by each of them. The ESAs should also develop a methodological framework for such reviews. The independent reviews should not only focus on the convergence of supervisory practices, but also on the capacity of competent authorities to achieve high quality supervisory outcomes, as well as on the independence of those competent authorities. The results of those reviews should be published to encourage compliance and increase transparency, unless such publication would involve risks to financial stability.

(15a)In view of the importance of ensuring that the Union supervisory framework for combating of money-laundering and terrorist financing is applied effectively, independent reviews to provide objective and transparent perspectives on supervisory practices are of paramount importance. Where such reviews reveal serious concerns, which the competent authority does not remedy, EBA should notify the European Parliament, the Council and the Commission. (15b) For carrying out its tasks and exercising its powers, EBA should be able to take individual decisions addressed to financial sector operators in the context of the procedure for breach of Union law and of the procedure of binding mediation even when the material rules are not directly applicable to financial sector operators, after having taken a decision addressed to the competent authority. Where the material rules are laid down in Directives, EBA should apply the national legislation transposing those Directives. Where the relevant Union law is composed of Regulations and where, on the date of entry into force of this Regulation, those Regulations expressly grant options to Member States, EBA should apply the national legislation exercising those options. (16)A harmonised supervision of the financial sector also requires that disagreements between the competent authorities of different Member States in cross–border situations are settled efficiently. The existing rules for settling such disagreements are not fully satisfactory. They should therefore be adapted so as to be more easily applicable. (17)Integral to the ESAs work on convergence of supervisory practices is the promotion of a Union supervisory culture. However, the ESAs are not equipped with all the tools required to achieve this objective. It is necessary to enable the ESAs to set out the general supervisory objectives and priorities in a multiannual Strategic Supervisory Plan, intended to assist competent authorities in identifying and focussing on the most important areas of concern for EU-wide market integrity and financial stability, including with respect to prudential supervision of firms engaged in cross-border activities. The Strategic Supervisory Plan should be risk-based and take into account general economic and regulatory orientations for supervisory actions as well as relevant micro-prudential trends, potential risks and vulnerabilities identified by the ESAs in their reviews of competent authorities and from Union-wide and stress tests. The competent authorities should subsequently draw up annual work programmes to implement the Strategic Supervisory Plan, which convert the Union priorities and objectives into operational objectives for those authorities. The ESAs should be empowered to review the implementation of the annual work programs on day-to-day supervisio,n including, on a sample basis, supervisory measures taken in individual cases in order to ensure that the ESAs can achieve their objective of harmoising supervisory practices. (18)The current supervisory practices of outsourcing, delegation and risks transfer (back-to-back business or fronting) from one licensed entity to another entity vary from one Member State to another. Those divergent regulatory approaches carry a risk of regulatory arbitrage across Member States ("race to the bottom"). Inefficient supervision of outsourced, delegated or transferred activities exposes the Union to financial stability risks. Those risks are particularly acute in relation to supervised entities outsourcing, delegating or transferring risk to third countries where supervisory authorities may lack the necessary tool to adequately and effectively supervise material activities and key functions. ESAs should have an active role in promoting supervisory convergence by ensuring a common understanding and supervisory practices of outsourcing, risk transfer and delegation of material activities and key functions in third countries, in accordance with Union law and in view of guidelines, recommendations and opinions that the ESAs may adopt. The ESAs should therefore have the necessary powers to effectively coordinate supervisory actions carried out by national supervisory authorities both when authorising or registering an undertaking and as part of an ongoing review of supervisory practices. In performing this coordination role, ESAs should particularly focus on situations that may lead to a circumvention of the rules and monitor financial institutions or financial market participants that intend to make an extensive use of outsourcing, delegation and risk transfer in third countries with the intention of benefitting from the EU passport while essentially performing substantial activities or functions outside the Union (19)Continued financial stability requires that third-country equivalence decisions that have been adopted by the Commission are monitored on an ongoing basis. The ESAs should therefore verify whether the criteria, on the basis of which the third-country equivalence decisions have been taken and any conditions set out therein, are still fulfilled. In addition, the ESAs should monitor both the regulatory and supervisory developments and the enforcement practices in those third countries. In that context, the ESAs should also develop administrative arrangements with third-country competent authorities to obtain information for monitoring purposes and for coordinating supervisory activities. This enhanced supervisory regime will ensure that third countries/ equivalence is more transparent, more predictable for the third countries concerned and more consistent across all sectors. (20)The collection and gathering of accurate and complete information by the ESAs is essential to the carrying out of their tasks and functions and to achieving their objectives. In order to avoid duplication of reporting obligations for financial institutions and financial market participants, that information should be provided by the relevant competent authorities or national supervisory authorities which are closest to the financial markets and institutions. However, the ESAs should be able to address a duly justified and reasoned request for information directly to financial institutions or financial market participants where a competent authority does not or cannot provide that information within a specified period. Furthermore, it is necessary for the purposes of ensuring the effectiveness of the ESAs' right to collect information that they should have the possibility to impose periodic penalty payments or fines on those financial institutions or financial market participants that do not comply accurately, completely or in a timely manner with a request or decision to submit information. The right of the financial institution or financial market participant concerned to be heard by the ESAs should be guaranteed explicitly. (21)Within the founding regulations of the ESAs it was provided that competent authorities would play a key role within their governance structure. It was also specified in those regulations that in order to prevent conflicts of interest, the members of the Board of Supervisors and of the Management Board would act independently and in the sole interest of the Union. The initial governance structure of the ESAs did not however provide sufficient safeguards to ensure that conflicts of interest be entirely avoided which can affect the ESAs' ability to take all the decisions necessary in the area of supervisory convergence and to ensure that their decisions take the broader Union interests fully into account. Therefore in order to ensure the effectiveness and efficiency of the decision making process of the ESAs, the allocation of the decision making powers within the ESAs should be redefined. (22)Moreover, the Union dimension in the decision-making process within the Board of Supervisors should be enhanced by including independent full time members as members of the Board, who are not subject to possible conflicts of interest. Decision-making powers on issues of a regulatory nature and on direct supervision should remain fully with the competence of the Board of Supervisors. The Management Board should be transformed into an Executive Board composed of full time members and should decide on certain non-regulatory issues, including independent reviews of competent authorities, dispute settlements, breach of Union law, the Strategic Supervisory Plan, monitoring of outsourcing, delegation and risk transfers to third countries, stress tests and requests for information. The Executive Board should also examine and prepare all decisions to be taken by the Board of Supervisors. Moreover, the position and role of the Chairperson should be enhanced by empowering the Chairperson with formal tasks and with a casting vote in the Executive Board. Finally, the Union dimension in the ESAs governance should also be strengthened by amending the selection procedure of the Chairperson and the members of the Executive Board to one which will include the role of the Council and the European Parliament. The Executive Board should have a balanced composition. (23)In order to provide for an appropriate level of expertise and accountability, the Chairperson and the members of the Executive Board should be appointed on the basis of merit, skills, knowledge of clearing, post-trading and financial matters, as well as experience relevant to the financial supervision. To ensure transparency and democratic control, as well as to safeguard the rights of the Union institutions, the Chairperson and the members of the Executive Board should be chosen on the basis of an open selection procedure. The Commission should establish a shortlist and submit that shortlist to the European Parliament for approval. Following that approval, the Council should adopt a decision to appoint the members of the Executive Board. The Chairperson and the full time members of the Executive Board should be accountable to the European Parliament and to the Council for any decisions taken on the basis of the founding Regulations. (24)To ensure a more efficient allocation of operational tasks on the one hand and the management of administrative day-to-day activities on the other hand, the current tasks of the Executive Director of each of the ESAs should be assumed by one of the members of the Executive Board, who should be selected on the basis of those particular tasks. (24a)To ensure that the appropriate level of expertise underpins decisions relating to anti-money laundering and terrorist financing measures, it is necessary to set up a committee composed of the heads of authorities and bodies in charge of compliance with anti-money laundering and terrorist financing legislation , which will examine and prepare decisions to be taken by EBA. In order to avoid duplication, this new committee will replace the existing anti-money laundering sub-committee which has been set up within the ESAs Joint Committee. (25)It is appropriate that financial institutions and financial market participants contribute to the financing of the activities of the ESAs, because the overall objective of the activities of the ESAs is to contribute to financial stability and, through the avoidance of distortions of competition, the proper operation of the single market. The activities of the ESAs benefit all financial institutions and financial market participants, whether or not they operate across borders. The ESAs contribute to them conducting their business in a stable environment and on a level playing field. Financial institutions and financial market participants that are not directly supervised by the ESA’s should therefore also contribute to the funding of those activities of the ESAs from which they benefit. In addition, the ESAs should however also receive fees paid by the financial institutions and financial market participants that are directly supervised by them. (26)Within each category of financial institutions and financial market participants, the level of contributions should take into account how much each financial institution and financial market participant benefits from the activities of the ESAs. Accordingly, individual contributions by financial institutions and financial market participants should be determined by reference to their size in order to reflect their importance in the relevant market. The collection of very small contributions should be subject to a de minimis threshold, to ensure that their collection is economical whilst at the same time ensuring that larger firms are not required to contribute disproportionately. (27)In order to determine how the annual contributions by individual financial institutions and financial market participants are to be calculated, power to adopt acts in accordance with Article 290 of the Treaty should be delegated to the Commission. The delegated acts will establish a methodology to allocate the estimated expenditure to categories of financial institutions or financial market participants and criteria to determine the level of individual contributions based on size. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement on Better Law-Making of 13 April 2016. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts. (28)To preserve the confidentiality of the work of the ESAs, the requirements of professional secrecy should also apply to any person who provides any service, directly or indirectly, permanently or occasionally, related to the tasks of the ESA concerned. (29)Regulations (EC) 1093/2010, 1094/2010 and 1095/2010 as well as sectoral financial services legislation require the ESAs to seek effective administrative arrangements, involving the exchange of information with third-country supervisors. The need for effective cooperation and information exchange should become all the more important when, pursuant to this amending Regulation, some of the ESAs assume additional, broader responsibilities in relation to the supervision of non-EU entities and activities. Where, in this context, the ESAs process personal data, including by transferring such data outside the Union, they are bound by the requirements of Regulation (EU) No 2018/XXX (Data Protection Regulation for EU institutions and Bodies). In the absence of an adequacy decision or of appropriate safeguards, for example provided for in administrative arrangements within the meaning of Article 49(3) of the Data Protection Regulation for EU institutions and Bodies, the ESAs may exchange personal data with third-country authorities in accordance with and under the conditions of the public interest derogation as set out in Article 51(1)(d) thereof, which notably applies to cases of international data exchange between financial supervisory authorities. (30)It is essential that the EBA decision making procedures provide appropriate safeguards for Member States not participating in the banking union, whilst at the same time enabling the EBA to continue to take decisions in an effective manner when the number of non-participating Member States reduces. The current voting rules requiring that a majority of participating member States and a majority of non-participating Member States for EBA take a decision should be maintained. However, additional safeguards are required in order to avoid a scenario whereby decisions cannot be taken only because of absences of member State competent authorities and in order to ensure that as many national competent authorities as possible are present when voting to end up with a strong and legitimate vote. (31)The founding regulations of the ESAs provide that the ESAs, in cooperation with the ESRB, should initiate and coordinate Union-wide stress tests in order to assess the resilience of financial institutions or financial market participants to adverse market developments. It should also ensure that a consistent methodology is applied, in as much as possible, at national level to such tests. To ensure a proper balance between competent authorities' supervisory concerns and Union wide considerations, it is appropriate to transfer to the Executive Board of the ESAs the power to decide on the initiation and coordination of stress tests. It should also be clarified, in respect of all of the ESAs, that the professional secrecy obligations of competent authorities shall not prevent competent authorities from transmitting the results of stress test to the ESAs for the purpose of publication. (32)To ensure a high level of convergence in the area of supervision and approval of internal models, EIOPA should be able to issue opinions to remedy potential inconsistencies and assist competent authorities in reaching agreement related to the approval of internal models. Competent authorities should take their decisions in conformity with these opinions, or alternatively explain why there are not conforming to the opinion.

(33)With the ever increasing cross-border dimension of trading activities and, in particular, of the activities of certain investment firms which, by their systemic nature, may have cross-border effects impacting financial stability, ESMA should have an enhanced coordination role in recommending competent authorities to initiate corresponding investigations. Furthermore, it should be able to facilitate the exchange of information relevant for those investigations, where ESMA has reasonable grounds to suspect that activity with significant cross-border effects is taking place that threatens the orderly functioning and integrity of financial markets or the financial stability in the Union. For this purpose, ESMA should maintain a data storage facility to collect from, and disseminate between, competent authorities, all relevant information (34)The main objectives of Regulation (EU) No 345/2013 of the European Parliament and of the Council, Regulation (EU) No 346/2013 of the European Parliament and of the Council and Regulation (EU) 2015/760 of the European Parliament and of the Council is boosting jobs and growth, SME financing, social and long-term investments, as well as promoting an EU investment culture. However, the divergent use by national competent authorities of their discretion, their divergent administrative practices, and the differences in supervisory cultures and performance remain despite the harmonisation achieved by the three Regulations. Those divergences hinder the necessary level playing field among managers of qualifying venture capital funds, qualifying social entrepreneurship funds and long-term investment funds in different Member States increasing, at the same time, the transaction and operational costs of those managers. (35)To lower transaction and operational costs, to strengthen investor choice and to increase legal certainty, it is appropriate to transfer the supervisory powers, including the granting and withdrawal of registrations and authorisations, for managers of qualifying venture capital funds and those funds as referred to in Regulation (EU) No 345/2013, managers of qualifying social entrepreneurship funds or those funds as referred to in Regulation (EU) No 346/2013 and European long-term investment funds as referred to in Regulation (EU) 2015/760, from the competent authorities to ESMA. For that purpose, ESMA should be able to conduct investigations and on-site inspections and to impose penalties or periodic penalty payments to compel persons to put an end to an infringement, to supply complete and correct information required by ESMA or to submit to an investigation or an on-site inspection. (36)Regulation (EU) 2015/760 of the European Parliament and of the Council of 29 April 2015 on European long-term investment funds lays down uniform requirements which must be met by long-term funds in order to be authorised as an ‘ELTIF’. Regulation (EU) 2015/760 lays down rules on qualifying investments, qualifying portfolio undertakings, concentration rules, and eligible investors. The rules also define the supervisory powers, including requirements for authorizations and ongoing supervision. Whilst maintaining the prudential rules in Regulation (EU) 2015/760, this Regulation confers supervisory powers, including authorization, ongoing supervision and withdrawals of authorisations, on ESMA. This regulation entrusts ESMA with the drawing up of draft regulatory technical standards which do not involve policy choices for submission to the Commission, so that the legal obligations and the scope of ESMA's discretion under Regulation (EU) 2015/760 are sufficiently clear. Similar changes have been made to Regulations (EU) 345/2013 and 346/2013 to confer supervisory powers on ESMA. (37)In order to effectively exercise its supervisory powers with respect to qualifying venture capital funds, qualifying social entrepreneurship funds and European long-term investment funds and their managers, ESMA should be able to conduct investigations and on-site inspections. To support ESMA's oversight capabilities, ESMA should be granted powers to impose penalties or periodic penalty payments to compel persons to put an end to an infringement, to supply complete and correct information required by ESMA or to submit to an investigation or an on-site inspection. This Regulation should therefore clearly define the boundaries of such administrative sanctions or other administrative measures which should be effective, proportionate and dissuasive and ensure a common approach and a deterrent effect. ESMA's investigatory and enforcement activities should rely on the support of national authorities where needed and required. ESMA should be empowered to delegate certain of these functions can still be delegated back to the national competent authorities (38)Article 40 of Regulation (EU) No 600/2014 granted ESMA with temporary intervention powers, which allow ESMA under certain conditions, to temporarily prohibit or restrict in the Union the marketing, distribution or sale of certain financial instruments or financial instruments with certain specified features, or a type of financial activity or practice. It is explicit that these product intervention powers under Regulation (EU) No 600/2014 apply to investment firms and credit institutions involved in marketing, distribution or sale of financial instruments, including units in collective investment undertakings. Since units in collective investment undertakings may also be directly marketed, distributed or sold by management companies of undertakings for collective investment in transferable securities and investment companies authorised in accordance with Directive 2009/65/EC of the European Parliament and of the Council and managers of alternative investment funds (AIFMs) authorised in accordance with Directive 2011/61/EU of the European Parliament and of the Council, in the interest of enhancing legal certainty it is necessary to make it explicit that the above-mentioned product intervention powers under Regulation (EU) No 600/2014 also apply in respect of management companies of UCITS and UCITS investment companies, as well as to AIFMs. (39)In strictly defined and exceptional cases, ESMA may use its intervention powers to restrict or prohibit marketing, sale or distribution of units or shares in UCITS or AIFs also by their managers. This would be appropriate when the proposed action addresses a significant investor protection concern or a threat to the orderly functioning and integrity of financial markets or to the stability or part of the financial system in the Union; regulatory requirements under Union law that are applicable to the relevant financial instrument or activity do not address the threat; and a competent authority or competent authorities have not taken action to address the threat or the actions that have been taken do not adequately address the threat (40)Inconsistencies in the quality, formatting, reliability and cost of trading data have a detrimental effect on transparency, investor protection and market efficiency. In order to enhance the monitoring and reconstruction of trading data, to improve the consistency and quality of those data and their availability and accessibility at reasonable cost throughout the Union for the relevant trading venues, Directive 2014/65/EU introduced a new legal regime for data reporting services, including the authorisation and supervision of data reporting services providers. (41)The quality of trading data and of the processing and provisioning those data, including cross-border data procession and provisioning, is of paramount importance to achieve the main objective of Regulation (EU) No 600/2014 of strengthening the transparency of financial markets. The provision of core data services are therefore pivotal for users to be able to obtain the desired overview of trading activity across Union financial markets and for competent authorities to receive accurate and comprehensive information on relevant transactions. (42)In addition, trading data is an increasingly essential tool for effective enforcement of requirements stemming from Regulation (EU) No 600/2014. Given the cross-border dimension of data handling, data quality and the necessity to achieve economies of scale, and to avoid the adverse impact of potential divergences on both data quality and the tasks of data reporting service providers, it is beneficial and justified to transfer authorisation and supervisory powers in relation to data reporting service providers from competent authorities to ESMA and specify those powers in Regulation (EU) No 600/2014 enabling, at the same time, the consolidation of the benefits arising from pooling data-related competences within ESMA.. (43)Retail investors should be adequately informed about potential risks when they decide to invest in a financial instrument. The legal framework of the Union aims at reducing the risk of misselling where retail investors are sold financial products which do not fit their needs or expectations. To that end, Directive 2014/65/EU and Regulation (EU) No 600/2014 enhance organisational and conduct of business requirements to ensure that investment firms act in the best interests of their clients. Those requirements include enhanced risk disclosure to clients, better assessment of suitability of products recommended as well as an obligation to distribute financial instruments to the identified target market, taking into account factors such as the solvency of issuers. ESMA should make full use of its powers to ensure supervisory convergence and support national authorities in achieving a high level of investor protection and effective oversight of risks associated with financial products. (44)It is important to ensure effective and efficient submissions, compilation, analysis and publication of data for the purposes of calculations for determining the requirements for the pre-and post-trade transparency and trading obligation regimes, as well as for the purposes of reference data in accordance with Regulation (EU) No 600/2014 and Regulation (EU) No 596/2014. ESMA should therefore be conferred competences to undertake direct data gathering from market participants in relation to pre- and post-trade transparency requirements, as well as well as their authorisation and oversight of data reporting services providers. (45)Granting those competences to ESMA allows for a centrally managed authorisation and oversight, which would avoid the current situation where multiple trading venues, systematic internalisers, APAs and CTPs are required to provide multiple competent authorities with data which are only then provided to ESMA. Such a centrally managed system should be highly beneficial to the market participants in terms of higher data transparency, investor protection and market efficiency. (46)The conferral of data gathering powers, authorisation and oversight from competent authorities to ESMA is also instrumental to other tasks ESMA is performing under Regulation (EU) No 600/2014, such as market monitoring, ESMA's temporary intervention powers and position management powers, as well as ensuring the consistent compliance with pre-trade and post-trade transparency requirements.. (47)For ESMA to exercise its supervisory powers effectively within the area of data processing and provision, ESMA should be able to conduct investigations and on-site inspections. ESMA should be able to impose penalties or periodic penalty payments to compel data reporting service providers to put an end to an infringement, to supply complete and correct information required by ESMA or to submit to an investigation or an on-site inspection and to impose administrative sanctions or other administrative measures where it finds that a person has committed, intentionally or negligently, an infringement of Regulation (EU) No 600/2014. (48)Financial products using critical benchmarks are available in all Member States. Those benchmarks are therefore of crucial importance for the functioning of financial markets and financial stability in the Union. The supervision of a critical benchmark should therefore take a holistic view of potential impacts, not only in the Member State where the administrator is located and the Member States where its contributors are located, but across the entire Union. It is hence appropriate that critical benchmarks are supervised at Union level by ESMA. To avoid duplication of tasks, administrators of critical benchmarks should be supervised only by ESMA, including any non-critical benchmarks they might administer. (49)Where, however, a benchmark is of critical importance only in one Member State closer market proximity of the competent authority of that Member State might make it appropriate for ESMA to delegate, entirely or in parts, the supervision of that benchmark to the competent authority of the Member State where the administrator is located, provided that ESMA has obtained the prior consent of that competent authority for that purpose. (50)As administrators of and contributors to critical benchmarks are put under stricter requirements than administrators of and contributors to other benchmarks, the designation of benchmarks as critical benchmarks should be undertaken by the Commission or ESMA and should be codified by the Commission. As national competent authorities have best access to data on and information about benchmarks they supervise, they should notify the Commission or ESMA of benchmarks which, in their opinion, fulfil the criteria identifying critical benchmarks. . (51)Colleges of supervisors for critical benchmarks were envisaged to contribute to the harmonised application of rules under Regulation (EU) 2016/1011 and to the convergence of supervisory practices. Because ESMA is in direct contact with all national supervisors or is made up of those supervisors, those colleges of supervisors will no longer be needed. (52)The procedure to determine the Member State of reference for benchmark administrators located in third countries that apply for recognition in the Union is cumbersome and time-consuming for both applicants and national competent authorities. Applicants might try to influence that determination in the hope of supervisory arbitrage, as might other benchmark administrators located in third countries that seek access to the Union via the endorsement regime. Those benchmark administrators might choose their legal representative strategically in a Member State where they consider supervision less strict. A harmonised approach with ESMA as competent authority for third country benchmarks and their administrators avoids these risks and the costs of determining the Member State of reference as well as of the subsequent supervision. Furthermore, this role as competent authority for third country benchmarks establishes ESMA as the counterpart in the Union for supervisors in third countries, making cross-border cooperation more efficient and effective.

(53)Many if not the majority of benchmark administrators are banks or financial services firms handling client money. In order not to undermine the Union's fight against money laundering or terrorist financing it should be a precondition for the conclusion of a cooperation arrangement with a competent authority under an equivalence regime that the country of the competent authority is not on the list of jurisdictions which have strategic deficiencies in their national anti-money laundering and countering the financing of terrorism regimes that pose significant threats to the financial system of the Union. (54)Almost all benchmarks are referenced in financial products which are available in several Member States, if not the entire Union. To detect risks related to the provision of benchmarks that might no longer be reliable or representative of the market or economic reality they intend to measure, competent authorities, including ESMA, should cooperate and assist each other where appropriate. (55)Due to the nature of the securities and issuers concerned, certain types of prospectuses drawn up according to Regulation (EU) 2017/1129 involve a cross-border dimension within the Union, a level of technical complexity and/or potential risks of regulatory arbitrage which are such that their centralised supervision by ESMA would achieve more effective and efficient results than their supervision at national level. Consolidating at the level of ESMA the approval of such prospectuses, as well as related supervisory and enforcement activities at the level of ESMA, should reduce compliance costs and administrative barriers while enhancing the quality, consistency and efficiency of supervision in the Union. (56)Private placements of non-equity securities are an important source of capital for issuers and are cross-border by nature. While a private placement with qualified investors does not require a prospectus, the subsequent admission to trading of the securities on a regulated market is subject to the publication of a prospectus under Regulation (EU) 2017/1129. The prospectus regime provides issuers with the flexibility to choose their home Member State where the denomination by unit of non-equity securities is in excess of 1000 EUR. As the non-equity securities concerned by private placements typically display a denomination by unit in excess of 1 000 EUR, this creates a potential for regulatory forum shopping. Entrusting ESMA with approving such wholesale non-equity prospectuses admitted to trading on a regulated market or its specific segment to which only qualified investors can have access to should achieve the double objective of ensuring a level playing field for issuers and a higher degree of efficiency by significantly streamlining approval procedures. (57)The approval of prospectuses relating to asset backed securities as well as the approval of prospectuses drawn up by specialist issuers, such as property companies, mineral companies, scientific research based companies or shipping companies, require national competent authorities to have highly specialized staff available, in most cases to deal with a fairly modest volume of prospectuses. Besides, certain non-financial information to be disclosed by specialist issuers is not set out in the delegated acts referred to in Article 13 of Regulation (EU) 2017/1129 but is left to the discretion of national competent authorities. This represents a potential source of inefficiency and regulatory arbitrage. Entrusting ESMA with the approval of these types of prospectuses should, on the one hand, ensure a level playing field in terms of information disclosure and eliminate the risk of regulatory arbitrage and, on the other hand, optimise the allocation of supervisory resources at Union level by establishing ESMA as the centre of expertise, thereby enhancing the efficiency of supervision of the prospectuses concerned. (58)Third country issuers which draw up a prospectus in accordance with Union law enjoy some flexibility as regards the choice of their home Member State for the purpose of prospectus approval, which carries the risk of creating supervisory forum shopping across Member States. Consolidating such approvals at the level of ESMA would ensure a fully harmonised approach vis-à-vis third country issuers and eliminate the potential for regulatory arbitrage. Third country issuers will thereby have ESMA as their single point of contact in the Union regardless of the Member State(s) where they offer their securities or request an admission to trading. This removes the need to determine a home Member State for such third country issuers. (59)The equivalence regime for prospectuses drawn up under the national laws of third countries should be amended to provide that the equivalence assessment and the subsequent adoption of a decision by the Commission are based not only on the information requirements of the national laws of such third countries, but also on the existence of a framework for the scrutiny and approval of the prospectus by the third country supervisor, including its supplements, where applicable, and effective supervision and enforcement of the offers and admissions under such prospectus. In order to be consistent with the approach set out by the Commission in its Staff Working Document 'EU equivalence decisions in financial services policy: an assessment' (SWD(2017) 102 final), the Commission should be able to subject its equivalence decision to additional conditions with a view to protecting market integrity within the Union, and promoting the internal market for financial services as well as common values and shared regulatory objectives at international level. Such conditions may consist in a requirement for the third country to provide for an effective equivalent system for the recognition of prospectuses drawn up according to Regulation (EU) No 2017/1129 or the ability of ESMA to cooperate with the relevant third country supervisor in order to monitor the rules of the third country on an ongoing basis. (60)Where the legal and supervisory arrangements of a third country relating to prospectuses drawn up in accordance with the national law of that third country have been declared equivalent by the Commission, and where an appropriate cooperation arrangement has been concluded between ESMA and the supervisory authority of that third country, any prospectus approved by the supervisory authority of that third country which is used in the Union for an offer of securities to the public or an admission to trading on a regulated market should be filed with ESMA and the rules for determining the home Member State should be disapplied. (61)As the equivalence regime provided for in Regulation (EU) 2017/1129 requires that competent authorities and ESMA rely on third country supervisors with regard to offers and admissions to trading taking place in the Union on the basis of a prospectus drawn up under third-country rules, those competent authorities and ESMA also need to be confident that the prevention of the use of the financial system for the purposes of money laundering and terrorist financing is ensured in the third country concerned. For that purpose, and also in order not to undermine the Union's fight against money laundering and/or terrorist financing, it should be a precondition for a conclusion by ESMA of a cooperation arrangement with a third country supervisor under the equivalence regime provided by Regulation (EU) 2017/1129 that the third country is not included on the list of jurisdictions which are declared as having strategic deficiencies in their national anti-money laundering and countering the financing of terrorism regimes that pose significant threats to the financial system of the Union. (62)ESMA should be empowered to impose administrative sanctions or take other administrative measures for infringements of Regulation (EU) No 2017/1129 related to the specific types of prospectuses for which approval is conferred to ESMA. This Regulation should therefore clearly define the boundaries of such administrative sanctions or other administrative measures which should be effective, proportionate and dissuasive. (63)The supervision of advertisements related to those prospectuses whose approval is conferred to ESMA should also be transferred to ESMA. ESMA should have the option to exercise control over the compliance of those advertisements. However such control should always be performed by ESMA in relation to any advertisement disseminated in a Member State whose competent authority has formally requested ESMA to make use of its controlling power whenever a prospectus approved by ESMA is used for an offer or admission in its jurisdiction. To perform such a task, ESMA should have adequate human resources with sufficient knowledge of the relevant national rules on consumer protection. (64)ESMA should scrutinise and approve all prospectuses of the types defined by this Regulation that are submitted for approval from the date of application of this Regulation. Prospectuses of the types defined by this Regulation that were approved by a competent authority before the date of application of this Regulation, or submitted for approval to a competent authority but not yet approved at that date, should continue to be supervised by that competent authority. To avoid any confusion, such supervision should cover in particular the finalisation of the scrutiny and approval procedure for those prospectuses not yet approved, as well as all approval and notification tasks applying to related supplements and final terms, where applicable. (65)It is appropriate to provide for a reasonable period of time to make the necessary arrangements for the envisaged governance structure and the delegated and implementing acts in order to enable the ESAs and the other parties concerned to apply the rules introduced by this Regulation. (66)Regulation (EU) No 1093/2010); Regulation (EU) No 1094/2010; Regulation (EU) No 1095/2010; Regulation (EU) No 345/2013; Regulation (EU) No 346/2013; Regulation (EU) No 600/2014 ; Regulation (EU) No 2015/760; Regulation (EU) 2016/2011; Regulation (EU) 2017/1129 should therefore be amended accordingly, HAVE ADOPTED THIS REGULATION: Article 1

Amendments to Regulation (EU) No 1093/2010 Regulation (EU) 1093/2010 is amended as follows: (1)Article 1 is amended as follows: (a)paragraph 2 is replaced by the following: "2. The Authority shall act within the powers conferred by this Regulation and within the scope of Directive 2002/87/EC, Directive 2008/48/EC of the European Parliament and of the Council*, Regulation (EU) No 575/2013 of the European Parliament and of the Council, Directive 2013/36/EU of the European Parliament and of the Council, Directive 2014/49/EU of the European Parliament and of the Council**, Directive 2014/92/EU of the European Parliament and of the Council***, Regulation (EU) 2015/847**** of the European Parliament and the Council*****, Directive (EU) 2015/2366 of the European Parliament and of the Council****** and, to the extent that those acts apply to credit and financial institutions and the ompetent authorities that supervise them, within the relevant parts of Directive 2002/65/EC and Directive (EU) 2015/849 of the European Parliament and of the Council*******, including all directives, regulations, and decisions based on those acts, and of any further legally binding Union act which confers tasks on the Authority. The Authority shall also act in accordance with Council Regulation (EU) No 1024/2013********.

* Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC (OJ L 133, 22.5.2008, p. 66). **Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes Text with EEA relevance (OJ L 173, 12.6.2014, p. 149). ***Directive 2014/92/EU of the European Parliament and of the Council of 23 July 2014 on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features Text with EEA relevance (OJ L 257, 28.8.2014, p. 214). ****Regulation (EU) 2015/847 of the European Parliament and of the Council of 20 May 2015 on information accompanying transfers of funds and repealing Regulation (EC) No 1781/2006 (OJ L 141, 5.6.2015, p. 1). ****Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC (OJ L 337, 23.12.2015, p. 35). *****Directive 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC (OJ L 141, 5.6.2015, p. 73). *****Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63)."; (b)in Article 1(2), the following subparagraph is added: 'The Authority shall also act within the powers conferred by this Regulation and within the scope of Directive (EU) 2015/849(*) of the European Parliament and of the Council to the extent that that Directive applies to financial sector operators and the competent authorities that supervise them. For this purpose only, EBA shall carry out the tasks conferred by any legally binding Union act on the European Insurance and Occupational Pensions Authority established by Regulation (EU) No 1094/2010 or to the European Securities and Markets Authority established by Regulation (EU) No 1095/2010. When carrying out such tasks, the Authority shall keep those Authorities informed of its activities concerning any entity which is a "financial" institution" as defined in Article 4(1) of Regulation (EU) No 1094/2010 or a "financial market participant" as defined in Article 4(1) of Regulation (EU) No 1095/2010.'; (*) Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC (OJ L 141, 5.6.2015, p. 73)'; (2)in Article 2 paragraph 5 the following subparagraph is inserted: "References in this Regulation to supervision include the activities of all competent authorities to be carried out pursuant to the legislative acts referred to in Article 1(2)."; (3)Article 4 is amended as follows: (a) point (1) is replaced by the following: “(1) financial institutions’ means any undertaking subject to regulation and supervision pursuant to the Union acts referred to in Article 1(2); "; (aa) the following point (1a) is inserted: “(1a) 'financial sector operators' means any entity which is subject to Directive (EU) 2015/849 and which is either a 'financial institution' as defined in Article 4(1) of this Regulation and in Article 4(1) of Regulation (EU) No 1094/2010 or a ‘financial market participant’ as defined in Article 4(1) of Regulation (EU) No 1095/2010"; (b) point (i) in point (2) is replaced by the following: "(i) competent authorities as defined in point (40) of Article 4(1) of Regulation (EU) No 575/2013, including the European Central Bank with regard to matters relating to the tasks conferred on it by Regulation (EU) No 1024/2013;"; (c) point (ii) of point (2) is replaced by the following:

"(ii) with regard to Directives 2002/65/EC and (EU) 2015/849 the authorities and bodies competent for ensuring compliance with the requirements of those that Directives by credit and financial institutions; (iia) with regard to Directive (EU) 2015/849 the authorities and bodies that supervise financial institutions and are competent for ensuring their compliance with the requirements of that Directive"; (d) point (iii) in point (2) is replaced by the following: "(iii) with regard to deposit guarantee schemes, bodies which administer deposit guarantee schemes pursuant to Directive 2014/49/EU of the European Parliament and of the Council or, where the operation of the deposit guarantee scheme is administered by a private company, the public authority supervising those schemes pursuant to that Directive, and relevant administrative authorities as referred to in that Directive; and"; (e) the following points (v) and (vi) of point (2) are added: "(v) competent authorities as referred to in Directive 2014/17/EU; in Regulation 2015/751, in Directive EU 2015/2366, in Directive 2009/110/EC, in Regulation (EC) No 924/2009 and in Regulation (EU) No 260/2012; (vi) bodies and authorities referred to in Article 20 of Directive 2008/48/EC."; (4)Article 6 is amended as follows: (a) point (2) is replaced by the following: "(2) an Executive Board, which shall exercise the tasks set out in Article 47;"; (b) point (4) is deleted; (5) Article 8 is amended as follows: (a) paragraph 1 is amended as follows: (i) the following point (aa) is replaced: (1) "(aa) to develop and maintain an up to date Union supervisory handbook on the supervision of financial institutions in the Union;"; (ii) the following point (ab) is inserted: (2)"(ab) to develop and maintain up to date a Union resolution handbook on the resolution of financial institutions in the Union which sets out supervisory best practices and high quality methodologies and processes;"; (iii) points (e) and (f) are replaced by the following: (3)"(e) to organise and conduct reviews of competent authorities and, in that context, to issue guidelines and recommendations and to identify best practices, with a view to strengthening consistency in supervisory outcomes; (4)(f) to monitor and assess market developments in the area of its competence including where relevant, developments relating to trends in credit, in particular, to households and SMEs and in innovative financial services;";

(iv) point (h) is replaced by the following: (5)"(h) to foster depositor, consumer and investor protection;"; (v) the following point (l) is added: "(l) to contribute to the prevention of the use of the financial system for the purposes of money-laundering and terrorist financing."; (b) in paragraph 1a, the following point (c) is inserted: "(c) take account of technological innovation, innovative and sustainable business models, and the integration of environmental, social and governance related factors."; (c) in paragraph 2, the following are amended (i) point (ca) is inserted: "(ca) issue recommendations as laid down in Articles 29a and 31a;"; ii) point h) is replaced by the following: "(h) collect the necessary information concerning financial institutions as provided for in Article 35 and Article 35b"; (6)Article 9 is amended as follows: paragraph 2 is replaced by the following: "2. The Authority shall monitor new and existing financial activities and may adopt guidelines and recommendations with a view to promoting the safety and soundness of markets, and convergence of regulatory and supervisory practices."; paragraph 4 is replaced by the following: "4. The Authority shall establish, as an integral part of the Authority, a Committee on financial innovation, which brings together all relevant competent authorities and authorities responsible for consumer protection with a view to achieving a coordinated approach to the regulatory and supervisory treatment of new or innovative financial activities and providing advice for the Authority to present to the European Parliament, the Council and the Commission. The Authority may also include national data protection authorities as part of the Committee."; (6a) the following Articles 9a and 9b are inserted: "Article 9a

Special tasks related to combating money-laundering and terrorist financing 1.The Authority shall take a leading role in promoting integrity, transparency and security in the financial system by means of adopting measures to prevent and combat money laundering and terrorist financing, including by: (a)collecting information from competent authorities relating to weaknesses identified in the processes and procedures, governance arrangements, fit and proper assessments, business models and activities of financial sector operators to prevent money-laundering and terrorist financing as well as measures taken by competent authorities. Competent authorities shall provide all such information to the Authority in addition to any obligations under Article 35. The Authority shall coordinate closely with Financial Intelligence Units;

(b)developing common standards for combating money-laundering and terrorist financing in the financial sector and promoting their consistent implementation; (c)monitoring market developments and assessing vulnerabilities to money-laundering and terrorist financing in the financial sector. 2.The Authority shall establish and keep up to date a central database of information collected pursuant to point (a) in paragraph 1. The Authority shall ensure that information is analysed and made available to competent authorities on a need-to-know and confidential basis. 3.The Authority shall promote convergence of supervisory processes referred to in Directive (EU) 2015/849, including by conducting periodic reviews, in accordance with Article 30. Where such a review reveals serious shortcomings in the identification, assessment or addressing of risks of money-laundering and terrorist financing and the competent authority does not take action to address the follow-up measures set out in the report referred to in Article 30(3), the Authority shall inform the European Parliament, the Council and the Commission. 4.The Authority shall regularly perform risk assessments on competent authorities with a main focus on competent authorities as referred to in point (iia) of Article 4(2)to test their strategies and resources to address and monitor the most important emerging risks related to money-laundering and terrorist financing. The Authority shall inform the Commission of the outcomes of these risk assessments, including by integrating the analysis of the outcomes in the opinion it is requested to deliver pursuant to paragraph 5 of Article 6 of Directive (EU) 2015/849. 5.In material cases of money-laundering or terrorist financing affecting cross border matters with third countries, the Authority shall have a leading role in facilitating cooperation between competent authorities in the Union and the relevant authorities in third countries. 6.The Authority shall establish a permanent internal committee on anti-money laundering and countering terrorist financing to coordinate measures in order to combat money-laundering and terrorist financing and to prepare draft decisions to be taken by the Authority in accordance with Article 44. 7.The committee shall be chaired by the Chairperson of the Board of Supervisors and shall be composed of the heads of the authorities and bodies competent for ensuring compliance with the requirements of Directive (EU) 2015/849 by financial institutions. In addition, the Commission, the ESRB, the Supervisory Board of the European Central Bank, the European Insurance and Occupational Pensions Authority, and the European Securities and Markets Authority may each nominate a high-level representative to participate in the committee meetings as observers."; Article 9b

Request for investigation related to the prevention of money laundering and terrorist financing 1.In matters concerning the prevention of the use of the financial system for the purpose of money laundering and terrorist financing in accordance with Directive (EU) 2015/849, the Authority may, where it has indications of material breaches, request a competent authority as referred to in point (iia) of Article 4(2) to investigate possible breaches of Union law, and where such Union law is composed of Directives or explicitly grants options for Member States, breaches of national laws transposing Directives or exercising options granted to Member States by Union law, by a financial sector operator and to consider imposing sanctions on that operator in respect of such breaches. Where necessary, it may also request a competent authority as referred to in point (iia) of Article 4(2) to consider adopting an individual decision addressed to that financial sector operator requiring it to undertake all necessary action to comply with its obligations under directly applicable Union law, or under national laws transposing Directives or exercising options granted to Member States by Union law, including the cessation of any conduct. 2.The competent authority shall comply with any request addressed to it in accordance with paragraph 1 and shall inform the Authority within 10 days of the steps it has taken or intends to take to comply with that request. 3.Without prejudice to the powers of the Commission under Article 258 TFEU, where a competent authority does not comply with paragraph 2 of this Article, Article 17 shall apply."; (7)Article 16 is amended as follows: (a) in paragraph 1, the following subparagraph is added: "The Authority may also address guidelines and recommendations to the authorities of Member States that are not defined as competent authorities under this Regulation but that are empowered to ensure the application of the acts referred to in Article 1(2). (b) paragraph 2 is replaced by the following: "2. The Authority shall, save in exceptional circumstances, conduct open public consultations regarding the guidelines and recommendations which it issues and shall analyse the related potential costs and benefits of issuing such guidelines and recommendations. Those consultations and analyses shall be proportionate in relation to the scope, nature and impact of the guidelines or recommendations. The Authority shall, save in exceptional circumstances, also request opinions or advice from the Banking Stakeholder Group referred to in Article 37."; (c) in paragraph 4, the following sentence is added: "The report shall also explain how the Authority has justified the issue of its guidelines and recommendations and summarise the feedback from public consultations on those guidelines and recommendations.";

(d) the following paragraph 5 is added: "5. Where two thirds of the members of the Banking Stakeholder Group are of the opinion that the Authority has exceeded its competence by issuing certain guidelines or recommendations, they may send a reasoned opinion to the Commission. The Commission shall request an explanation justifying the issuance of the guidelines or recommendations concerned from the Authority. The Commission shall, on receipt of the explanation from the Authority, assess the scope of the guidelines or recommendations in view of the Authority's competence. Where the Commission considers that the Authority has exceeded its competence, and after having given the Authority the opportunity to state its views, the Commission may adopt an implementing decision requiring the Authority to withdraw the guidelines or recommendations concerned .The decision of the Commission shall be made public."; (8) Article 17 is amended as follows: (a)in paragraph 2 the following subparagraphs are added: "Without prejudice to the powers laid down in Article 35, the Authority may address a duly justified and reasoned request for information directly to other competent authorities or relevant financial institutions, whenever it is deemed necessary for the purpose of investigating an alleged breach or non-application of Union law. Where it is addressed to financial institutions, the reasoned request shall explain why the information is necessary for the purposes of investigating an alleged breach or non-application of Union law. The addressee of such a request shall provide the Authority with clear, accurate and complete information without undue delay. Where a request for information has been addressed to a financial institution, the Authority shall inform the relevant competent authorities of such a request. The competent authorities shall assist the Authority in collecting the information, where so requested by the Authority."; (b)paragraphs 6 and 7 are replaced by the following: “6. Without prejudice to the powers of the Commission pursuant to Article 258 TFEU, where a competent authority does not comply with the formal opinion referred to in paragraph 4 within the period of time specified therein, and where it is necessary to remedy in a timely manner such non-compliance in order to maintain or restore neutral conditions of competition in the market or ensure the orderly functioning and integrity of the financial system, the Authority may, where the relevant requirements of the acts referred to in Article 1(2) are directly applicable to financial institutions or, in the context of matters relating to the prevention and combating of money laundering and terrorist financing, to financial sector operators, adopt an individual decision addressed to a financial institution or a financial sector operator requiring it to take all necessary action to comply with its obligations under Union law, including the cessation of any conduct. In matters concerning the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, where the relevant requirements of the acts referred to in Article 1(2) are not directly applicable to financial sector operators, the Authority may adopt a decision requiring the competent authority to comply with the formal opinion referred to in paragraph 4 within the period of time specified therein. If the authority does not comply with that decision, the Authority may also adopt a decision in accordance with the first sub-paragraph. To that effect, the Authority shall apply all relevant Union law, and where that Union law is composed of Directives, the national legislation transposing those Directives. Where the relevant Union law is composed of Regulations and where currently those Regulations explicitly grant options for Member States, the Authority shall apply also the national legislation exercising those options. The decision of the Authority shall be in conformity with the formal opinion issued by the Commission pursuant to paragraph 4 of this Article. 7. Decisions adopted in accordance with paragraph 6 shall prevail over any previous decision adopted by the competent authorities on the same matter. When taking action in relation to issues which are subject to a formal opinion pursuant to paragraph 4 of this Article or to a decision pursuant to paragraph 6, competent authorities shall comply with the formal opinion or the decision, as the case may be.”; (9)Article 19 is amended as follows: (a) paragraph 1 is replaced by the following: "1. In cases specified in the Union acts referred to in Article 1(2) and without prejudice to the powers laid down in Article 17, the Authority may assist the competent authorities in reaching an agreement in accordance with the procedure set out in paragraphs 2 to 4 in either of the following circumstances: (a) at the request of one or more of the competent authorities concerned where a competent authority disagrees with the procedure or content of an action, proposed action, or inactivity of another competent authority; (b) on its own initiative where on the basis of objective criteria, disagreement can be determined between competent authorities. In cases where the acts referred to in Article 1(2) require a joint decision to be taken by competent authorities, a disagreement shall be presumed in the absence of a joint decision being taken by those authorities within the time limits set out in those acts".;

(b) the following paragraphs 1a and 1b are inserted: "1a. The competent authorities concerned shall in the following cases notify the Authority without delay that an agreement has not been reached: (a) where a time limit for reaching an agreement between competent authorities has been provided for in the Union acts, referred to in Article 1(2), and the earlier of the following occurs : (i) the time limit has expired; (ii) one or more of the competent authorities concerned conclude that a disagreement exists, on the basis of objective factors; (b) where no time limit for reaching an agreement between competent authorities has been provided in the Union acts referred to in Article 1(2), and the earlier of the following occurs: (i) one or more of the competent authorities concerned concludes that a disagreement exists on the basis of objective factors; or (ii) two months have elapsed from the date of receipt by a competent authority of a request from another competent authority to take certain action in order to comply with those Union acts and the requested authority has not yet adopted a decision that satisfies the request. 1b. The Chairperson shall assess whether the Authority should act in accordance with paragraph 1. Where the intervention is at the Authority’s own initiative, the Authority shall notify the competent authorities concerned of its decision regarding the intervention. Pending the Authority’s decision in accordance with the procedure set out in Article 47(3a), in cases where the acts referred to in Article 1(2) require a joint decision to be taken, all competent authorities involved in the joint decision shall defer their individual decisions. Where the Authority decides to act, all the competent authorities involved in the joint decision shall defer their decisions until the procedure set out in paragraphs 2 and 3 is concluded."; (c) paragraph 3 is replaced by the following: "Where the competent authorities concerned fail to reach an agreement within the conciliation phase referred to in paragraph 2, the Authority may take a decision requiring those authorities to take specific action or to refrain from certain action in order to settle the matter, in order to ensure compliance with Union law. The decision of the Authority shall be binding on the competent authorities concerned. . The Authority’s decision may require competent authorities to revoke or amend a decision that they have adopted or to make use of the powers which they have under the relevant Union law."; (d) the following paragraph 3a is inserted: "3a. The Authority shall notify the competent authorities concerned of the conclusion of the procedures under paragraphs 2 and 3 together with, where applicable its decision taken under paragraph 3."; (e) paragraph 4 is replaced by the following: "4. Without prejudice to the powers of the Commission pursuant to Article 258 of the Treaty, where a competent authority does not comply with the decision of the Authority, and thereby fails to ensure that a financial institution complies with requirements directly applicable to it by virtue of the acts referred to in Article 1(2), the Authority may adopt an individual decision addressed to a financial institution requiring the necessary action to comply with its obligations under Union law, including the cessation of any practice."; “4. Without prejudice to the powers of the Commission pursuant to Article 258 TFEU, where a competent authority does not comply with the decision of the Authority, and thereby fails to ensure that a financial institution or, in the context of matters relating to the prevention and combating of money laundering and terrorist financing, a financial sector operator complies with requirements directly applicable to it by virtue of the acts referred to in Article 1(2), the Authority may adopt an individual decision addressed to that financial institution or financial sector operator requiring it to take all necessary action to comply with its obligations under Union law, including the cessation of any practice. In matters concerning the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, the Authority may also adopt a decision in accordance with the first subparagraph where the relevant requirements of the acts referred to in Article 1(2) are not directly applicable to financial sector operators. To that effect, the Authority shall apply all relevant Union law, and where this Union law is composed of Directives, the national legislation transposing those Directives. Where the relevant Union law is composed of Regulations and where currently those Regulations explicitly grant options for Member States, the Authority shall apply also the national legislation exercising those options.”; (10)Article 22 is amended as follows (a), paragraph 1a is deleted;

(b)in paragraph 4, the second subparagraph is replaced by the following: "For those purposes, the Authority may use the powers may use the powers conferred on it under this Regulation, including Article 35 and 35b."; (11)Article 29 is amended as follows: (a) paragraph 1 is amended as follows: (i) the following point (aa) is inserted: "(aa) issuing the Strategic Supervisory Plan in accordance with Article 29a;"; (ii) point (b) is replaced by the following: "(b) promoting an effective bilateral and multilateral exchange of information between competent authorities, pertaining to all relevant issues, including cyber security and cyber-attacks as appropriate, with full respect for the applicable confidentiality and data protection provisions provided for in the relevant Union legislation;"; (iii) point (e) is replaced by the following: "(e) establishing sectoral and cross-sectoral training programmes, including with respect to technological innovation, facilitating personnel exchanges and encouraging competent authorities to intensify the use of secondment schemes and other tools;"; (b) in paragraph 2, the following subparagraph is added: "For the purpose of establishing a common supervisory culture, the Authority shall develop and maintain an up-to-date Union supervisory handbook on the supervision of financial institutions in the Union, taking into account changing business practices and business models of financial institutions. The Authority shall also develop and maintain an up-to-date Union resolution handbook on the resolution of financial institutions in the Union. Both the Union supervisory handbook and the Union resolution handbook shall set out supervisory best practices and shall specify high quality methodologies and processes.”; (12)the following Article 29a is inserted: "Article 29a Strategic Supervisory Plan 1. Upon the entry into application of Regulation [XXX insert reference to amending Regulation] and every three years thereafter by 31 March, the Authority shall issue a recommendation addressed to competent authorities, laying down supervisory strategic objectives and priorities ("Strategic Supervisory Plan") and, taking into account any contributions from competent authorities,. The Authority shall transmit the Strategic Supervisory Plan for information to the European Parliament, the Council and the Commission and shall make it public on its website. The Strategic Supervisory Plan shall identify specific priorities for supervisory activities in order to promote consistent, efficient and effective supervisory practices and the common, uniform and consistent application of Union law and to address relevant micro-prudential trends, potential risks and vulnerabilities identified in accordance with Article 32. 2. By 30 September of each year, each competent authority shall submit a draft annual work programme for the following year to the Authority for consideration and specifically stipulate how that draft programme is aligned with the Strategic Supervisory Plan. The draft annual work programme shall contain specific objectives and priorities for supervisory activities and quantitative and qualitative criteria for the selection of financial institutions, market practices and behaviours and financial markets to be examined by the competent authority submitting the draft annual work programme during the year covered by that programme. 3. The Authority shall assess the draft annual work programme and where there are material risks for not attaining the priorities set out in the Strategic Supervisory Plan, the Authority shall issue a recommendation to the relevant competent authority aiming at the alignment of the relevant competent authority's annual work programme with the Strategic Supervisory Plan.

By 31 December of each year, the competent authorities shall adopt their annual work programmes taking into account any such recommendations. 4. By 31 March of each year, e