Opinion of the European Central Bank of 7 November 2008 on a draft Commission decision establishing the Committee of European Banking Supervisors (CON/2008/63)
Date: 2008-11-07
Institutions: European Central Bank
Subjects: EU control, banking supervision, committee (EU), credit institution

24.2.2009

EN

Official Journal of the European Union

C 45/1

I

(Resolutions, recommendations and opinions)

OPINIONS

EUROPEAN CENTRAL BANK

OPINION OF THE EUROPEAN CENTRAL BANK

of 7 November 2008

on a draft Commission decision establishing the Committee of European Banking Supervisors

(CON/2008/63)

(2009/C 45/01)

Introduction and legal basis

On 10 October 2008, the European Central Bank (ECB) received a request from the European Commission
services for an opinion on a draft Commission decision establishing the Committee of European Banking
Supervisors (hereinafter the ‘draft decision’). The draft decision is intended to replace the Commission Deci-
sion adopted in November 2003 (1).

The ECB's competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the
European Community since the draft decision affects the structure and the functions of one of the EU's
financial services committees and touches upon the contributory role of the European System of Central
Banks (ESCB) with regard to the smooth conduct of policies relating to the prudential supervision of credit
institutions and the stability of the financial system, as referred to in Article 105(5) of the Treaty. In accord-
ance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the
Governing Council has adopted this opinion.

1. General observations

1.1. In May 2008, the Economic and Financial Affairs Council (Ecofin) invited the Commission to revise the
Commission decisions on the establishment of the Level 3 Committees by giving to the Committees
specific tasks to foster supervisory cooperation and convergence of their roles in assessing risks to
financial stability, and Ecofin mentioned certain tasks that could be included (2). Reference is also made
in the Ecofin conclusions to certain issues which should be taken into account in developing the role
of the Level 3 Committees as regards the monitoring of risks to financial stability at EU level and
Ecofin specifically invited Committee of European Banking Supervisors (CEBS) and the Banking Super-
vision Committee (BSC) of the ESCB to ensure an efficient and appropriate division of labour between
them (3). Against this background, the ECB broadly welcomes the draft decision in so far as the amend-
the Lamfalussy
ments proposed by the Commission reflect

the conclusions of

the review of

(1) Commission Decision 2004/5/EC of 5 November 2003 establishing the Committee of European Banking Supervisors

(OJ L 3, 7.1.2004, p. 28).

(2) Council conclusions on the EU Supervisory Framework and Financial Stability Arrangements, as agreed by Ecofin on

14 May 2008, pp. 3-5, available at:
http://register.consilium.europa.eu/pdf/en/08/st08/st08515-re03.en08.pdf

(3) Council conclusions, pp. 5-6.

C 45/2

EN

Official Journal of the European Union

24.2.2009

framework conducted in 2007 (1) to which the Eurosystem also contributed (2). At the same time, the
ECB notes that in October 2008, following recent developments in the financial markets, the European
Council stressed the need to strengthen the supervision of the European financial sector with a view to
improving the coordination of supervision at European level (3). More specifically the European Council
welcomed the setting up of a high-level group by the Commission (4). In this context, the ECB empha-
sises that the specific comments expressed in this opinion are without prejudice to possible future
contributions to the broader debate relating to the work of this high-level group.

1.2. The support of the ECB for the work of CEBS is reflected both in its financial and technical contribu-
tions. The current developments in the financial markets confirm and reinforce the importance of close
cooperation and exchange of information between supervisory authorities and central banks, which is
now broadly reflected in the close interaction between CEBS and the BSC on regular risk assessment
and financial stability monitoring.

1.3. The ECB supports the objective of greater consistency between the Commission decisions which estab-
lished the ‘Lamfalussy’ Committees of Supervisors (Level 3 Committees), i.e. CEBS, the Committee of
European Insurance and Occupational Pensions Supervisors (CEIOPS) and the Committee of European
Securities Regulators (CESR) (5) and where applicable the Commission may also choose to take into
account the specific comments in this opinion in relation to the draft decisions pertaining to the other
two Level 3 Committees, on which the ECB is not consulted.

2.

Specific comments

2.1. New tasks allocated to CEBS (Article 4)

With regard to the new tasks referred to in the draft decision, the ECB has the following comments.

First, the ECB supports the introduction of references in the draft decision to the role of the Level 3
Committee as regards both mediation between supervisory authorities and delegation of tasks (6). Each
of the three Level 3 Committees has recently adopted a mediation mechanism designed to resolve
potential disputes and strengthen mutual understanding between supervisory authorities, to enhance
day-to-day cooperation between authorities and to strengthen supervisory convergence (7). Since the
practical functioning of this provision is untested in practice, a review of its implementation would be
desirable in due course. As regards CEBS's role in facilitating the delegation of tasks between supervi-
sory authorities, the ECB considers that this development could prove useful for the further promotion
of efficiency and effectiveness in the cross-border allocation of tasks between supervisory authorities
and help streamline the interaction between cross-border banking groups and supervisory authorities.

Furthermore, the draft decision refers to the contribution of CEBS to the common and uniform imple-
mentation and consistent application of Community legislation by issuing legally non-binding guide-
lines, recommendations and standards (8). In view of the importance of supervisory convergence for
the effective integration of the European financial system, the ECB suggests introducing a reference,
among the tasks of CEBS, to the role that the committee plays in facilitating the review of the practical
application of the above non-binding measures through the use of peer review tools.

(1) Communication from the Commission, Review of the Lamfalussy process — Strengthening supervisory convergence,

COM(2007) 727 final.

(2) Eurosystem contribution to the review of the Lamfalussy framework, November 2007, available on the ECB's website at:

www.ecb.int

(3) Presidency Conclusions, European Council, 15-16 October 2008, paragraph 8. The conclusions are available at:

http://www.consilium.europa.eu/cms3_applications/Applications/newsRoom/related.asp?BID=76&GRP=14127&LANG=1&cmsId=339
(4) See Communication from the Commission ‘From financial crisis to recovery: A European framework for action’,

COM(2008) 706 final, 29 October 2008, available at:
http://ec.europa.eu/commission_barroso/president/pdf/COMM_20081029.pdf

(5) See recital 6 of the draft decision.
(6) See recital 14 and Article 4(1)(a) of the draft decision (on mediation) and recital 17 and Article 4(1)(d) of the draft decision

(on delegation).

(7) See the Protocol on mediation mechanism of the CESR, CESR/06-286b, August 2006 on CESR's website at: http://www.
cesr-eu.org, the Protocol of the CEBS mediation mechanism, 25 September 2007 on CEBS's website at: http://www.c-ebs.
org, and the Protocol on mediation mechanism between insurance and pensions supervisors, CEIOPS-DOC-14/07,
October 2007 on CEIOPS's website at: http://www.ceiops.eu

(8) Article 3 of the draft decision.

24.2.2009

EN

Official Journal of the European Union

C 45/3

Second, the ECB notes that, in line with the Ecofin conclusions adopted on 14 May 2008, the Commis-
sion provides for a role for CEBS in setting operational guidelines to ensure the efficient and consistent
functioning of colleges of supervisors (1). This echoes the current initiative in the context of the review
of the Capital Requirements Directive (2) aimed at enhancing the legal underpinnings of colleges of
supervisors. In this respect, the ECB would like to stress the importance of ensuring consistency
between the provisions of the draft decision and those of the abovementioned directive.

2.2. Cooperation between CEBS and the BSC (Article 5)

In line with the Ecofin mandate to ensure an efficient and appropriate division of labour between CEBS
and the BSC (3), in its draft decision the Commission points out the need to prevent overlaps between
the tasks of the two committees (4). The Commission has agreed that this division of tasks could be
based, to a certain extent, on making a distinction between macro and micro prudential analyses (5). In
this respect and as stated in a previous opinion, the ECB stresses the importance of recognising the role
of the BSC, which has already developed a framework for monitoring macro-prudential develop-
ments (6). The draft decision refers to the fact that, in order to safeguard financial stability, a system is
needed at the level of the committees of supervisors to identify potential risks across borders and
across sectors at an early stage and that CEBS has a role to play in this respect by identifying
micro-prudential risks in the banking sector and regularly reporting on the outcome (7). Against this
background, the ECB has the following comments.

First, the ECB highlights that the reference in the draft decision to the interaction between the BSC and
CEBS should have a more positive tone, reflecting the existing cooperation between the three Level 3
Committees and the BSC. Therefore, in the draft decision instead of mentioning the need to prevent
overlaps with the work of the BSC, emphasis could be put on the need for a close interconnection
between these committees and the BSC (8).

Moreover, CEBS and the BSC have already agreed on the organisation of their interaction on regular
risk assessments and financial stability monitoring, aimed at avoiding duplication of work. While, in
line with its mandate, the BSC focuses on identifying the main prudential risks for the financial system
and the banking sector, CEBS focuses on the proactive identification of specific risks, supervisory
concerns and possible policy actions.

Second, under the draft decision, CEBS is required, where necessary, to ‘alert the other Committees of
Supervisors, finance ministries and national central banks about potential or imminent problems, so as
to ensure timely preventative or remedial action’ (9). The ECB suggests that this provision should be
clarified in order to avoid possible problems of confidentiality in the event of the transmission of
supervisory information on individual banks to finance ministries.

(1) Article 4(1)(e) of the draft decision.
(2) Proposal for a Directive of the European Parliament and of the Council amending Directives 2006/48/EC and 2006/49/EC
as regards banks affiliated to central institutions, certain own funds items, large exposures, supervisory arrangements, and
crisis management, COM(2008) 602 final. The Capital Requirements Directive is understood as comprising Directive
2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the
business of credit institutions (recast) (OJ L 177, 30.6.2006, p. 1) and Directive 2006/49/EC of the European Parliament
and of the Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions (recast) (OJ L 177,
30.6.2006, p. 201).

(3) Council conclusions on the EU Supervisory Framework and Financial Stability Arrangements, as agreed by Ecofin on

14 May 2008, available at:
http://register.consilium.europa.eu/pdf/en/08/st08/st08515-re03.en08.pdf

(4) Recital 21 and Article 5(5) of the draft decision.
(5) European Commission (DG Internal Market), Public Consultation Paper on amendments to Commission Decisions

establishing CESR, CEBS & CEIOPS, 23 May 2008, p. 11, available at:
http://ec.europa.eu/internal_market/finances/docs/committees/consultation_en.pdf

(6) Paragraph 7 of ECB Opinion CON/2004/7 of 20 February 2004 at the request of the Council of the European Union on a
proposal for a Directive of the European Parliament and of the Council amending Council Directives 73/239/EEC,
85/611/EEC, 91/675/EEC, 93/6/EEC and 94/19/EC and Directives 2000/12/EC, 2002/83/EC and 2002/87/EC of the
European Parliament and of the Council, in order to establish a new financial services committee organisational structure
(OJ C 58, 6.3.2004, p. 23).

(7) Recital 20 and Article 5(2), first paragraph of the draft decision.
(8) The close cooperation between CEBS and the BSC is already reflected in the revised CEBS Charter which took effect on
10 July 2008 and which is available on CEBS's website at: http://www.c-ebs.org (see, for instance, Articles 1(4), 4(5)
and 6(4) of the CEBS Charter).
(9) Article 5(1) of the draft decision.

C 45/4

EN

Official Journal of the European Union

24.2.2009

Third, the draft decision provides that, at least quarterly, CEBS should provide its assessment of key
risks and vulnerabilities in the banking sector to the Commission,
the Economic and Financial
Committee (EFC) and the European Parliament (1). The BSC's experience as regards the communication
of the results of its macro-prudential analysis to the EFC suggests that biannual reporting would be
more appropriate in normal times.

2.3. Financial conglomerates (Article 11)

The draft decision provides that cooperation between CEBS and CEIOPS in the area of supervision of
financial conglomerates will be exercised in a Joint Committee on Financial Conglomerates. As the ECB
already participates in the work of the existing Interim Working Committee on Financial Conglomer-
ates, as well as the European Financial Conglomerates Committee,
its participation as an observer
should be mentioned together with the Commission and CESR.

2.4. Qualified majority voting (Article 14)

On 7 October 2008, Ecofin welcomed the agreement reached by supervisory authorities in the Level 3
committees to include decision-making by qualified majority in their respective charters (2). The draft
decision provides that CEBS's decisions will ‘require 1. at least a quota of 255/345 of the weighted
votes and 2. a simple majority of the Member States’ (3). By contrast, CEBS's Charter provides that ‘deci-
sions shall require at least 255 votes in favour, cast by at least two-thirds of the Member States’. The
ECB notes that both procedures are provided for under the Treaty provisions on qualified majority
voting (4). However, for the sake of legal clarity, the ECB recommends ensuring consistency between
the voting rules of the draft decision and those of the CEBS charter, which might require introducing
direct references to the relevant Treaty provisions in the draft decision.

3. Drafting proposals

Where the above proposals would lead to changes in the draft decision, drafting proposals are set out
in the Annex.

This opinion will be published on the ECB's website once the Commission has adopted and published
the decision establishing the Committee of European Banking Supervisors.

Done at Frankfurt am Main, 7 November 2008.

The Vice-President of the ECB

Lucas D. PAPADEMOS

(1) Article 5(2) of the draft decision.
(2) Council conclusions, as agreed by Ecofin on 7 October 2008, available at:

http://www.consilium.europa.eu/ueDocs/cms_Data/docs/pressData/en/ecofin/103250.pdf

(3) Article 14 of the draft decision.
(4) Article 205(2) of the Treaty (as last amended in connection with the accession of Bulgaria and Romania to the European
Union) provides for two options. Depending on the type of act of the Council, i.e. whether the Treaty requires the act to be
adopted on a proposal from a Commission or not, decisions require for their adoption at least 255 votes in favour, cast
either (i) by a majority of the members or (ii) by at least two-thirds of the members respectively.

24.2.2009

EN

Official Journal of the European Union

C 45/5

ANNEX

DRAFTING PROPOSALS

Text proposed by the Commission

Amendments proposed by the ECB

Amendment 1

Recital 21 of the draft decision

(21) In order to adequately deal with cross-sector issues,
the work of the Committee should be closely inter-
connected with the activities of
the Committee of
European Insurance and Occupational Pensions Super-
visors and the Committee of European Securities
Regulators. This is of particular importance in addres-
sing possible cross-sectoral risks to financial stability.
Specific attention should be given to preventing over-
laps with the work of
the Banking Supervisory
Committee of the European System of Central Banks.

(21) In order to adequately deal with cross-sector issues,
the work of the Committee should be closely inter-
connected with the activities of
the Committee of
European Insurance and Occupational Pensions Super-
visors and the Committee of European Securities
Regulators. This is of particular importance in addres-
sing possible cross-sectoral risks to financial stability.
Specific attention should be given to preventing over-
laps with the work of
the Banking Supervisory
Committee of the European System of Central Banks.
The Committee shall also closely liaise with the
Banking Supervision Committee of the European
System of Central Banks.

Justification — See paragraph 2.2 of the opinion

Amendment 2

(new) Article 4(1)(g) of the draft decision

(g) Facilitate the review of the practical application of
the legally non-binding guidelines, recommenda-
tions and standards adopted by the Committee.

Justification — See paragraph 2.1 of the opinion

Amendment 3

Article 5(2) of the draft decision

The Committee shall, at

2.
least quarterly, provide
assessments of micro-prudential developments, risks and
vulnerabilities in the banking sector to the Commission,
the Economic and Financial Committee and the European
Parliament.

The Committee shall provide, at

2.
least quarterly,
biannual assessments of micro-prudential developments,
risks and vulnerabilities in the banking sector
to the
Commission, the Economic and Financial Committee and
the European Parliament.

Justification — See paragraph 2.2 of the opinion

Amendment 4

Article 5(4) of the draft decision

The Committee shall closely cooperate with the
4.
Committee of European Insurance
and Occupational
Pensions Supervisors and the Committee of European Secu-
rities Regulators
coverage of
cross-sectoral developments, risks and vulnerabilities.

to ensure an adequate

The Committee shall closely cooperate with the
4.
and Occupational
Committee of European Insurance
Pensions Supervisors and,
the Committee of European
Securities Regulators
and the Banking Supervision
Committee of the European System of Central Banks
to ensure an adequate coverage of cross-sectoral develop-
ments, risks and vulnerabilities.

Justification — See paragraph 2.2 of the opinion

C 45/6

EN

Official Journal of the European Union

24.2.2009

Text proposed by the Commission

Amendments proposed by the ECB

Amendment 5

Article 5(5) of the draft decision

5.
The Committee shall pay specific attention to the
prevention of overlaps with the work of the Banking Super-
the European System of Central
visory Committee of
Banks.

5.
The Committee shall pay specific attention to the
prevention of overlaps with the work of the Banking Super-
the European System of Central
visory Committee of
Banks.

Justification — See paragraph 2.2 of the opinion

Amendment 6

Article 11 of the draft decision

supervision of

Cooperation in the area of
financial
conglomerates between the Committee and the Committee
of European Insurance and Occupational Pensions Supervi-
sors shall be exercised in a Joint Committee on Financial
Conglomerates. The Commission and the Committee of
European Securities Regulators shall be invited to partici-
pate in the Joint Committee on Financial Conglomerates as
observers.

area of

supervision of

Cooperation in the
financial
conglomerates between the Committee and the Committee
of European Insurance and Occupational Pensions Supervi-
sors shall be exercised in a Joint Committee on Financial
Conglomerates. The Commission,
the Committee of
European Securities Regulators and the European Central
Bank shall be invited to participate in the Joint Committee
on Financial Conglomerates as observers.

Justification — See paragraph 2.3 of the opinion