COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document 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) 2016/2011 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
Date: 2017-09-20
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: EU office or agency, advertising, financial control, financial institution, financial legislation, financial market, fund (EU), market supervision, operation of the Institutions, third country

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   EUROPEAN COMMISSION  Brussels, 20.9.2017  SWD(2017) 309 final   COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT  Accompanying the document 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) 2016/2011 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  {COM(2017) 536 final} {SWD(2017) 308 final}  
 
 
Executive Summary Sheet 

Impact  assessment  on:  Proposal  for  amending  the  Regulations  establishing  the  European  Supervisory 
Authorities (Regulation (EU) No 1093/2010; Regulation (EU) No 1094/2010 and Regulation (EU) No 1095/2010) 

A. Need for action 

Why? What is the problem being addressed? Maximum 11 lines 
After 6 years of operation the following problems in the ESAs' framework have been identified:  
1) Constraints on the ESAs to fulfil their existing mandates in full. This problem is concerned with current 
constraints on the ESAs to meet their mandates in full and deliver the right output in terms of regulatory tasks, 
and supervisory convergence actions in particular, and how these constraints may put even more pressure on 
the ESAs as the process of financial integration continues. The problem drivers stem from inadequacies in how 
their powers have been framed, how the decision making operates (governance) and how they are resourced for 
these tasks.  
2)  Inadequate  scope  of  existing  mandates  going forward.  This  problem  is  concerned  with  inadequacies  in 
the scope of their mandates in relation to efforts to further integrate markets. This problem is mainly driven by 
the  absence  of  certain  powers  and  tasks  pertaining  to  large  EU-wide  cross-border  firms,  products  or  market 
infrastructures,  as  well  as  to  third-country  instruments  and  aspects.    Inadequate  governance  and  funding 
contributes to this problem by further hampering an effective exercise of wider powers.   

What is this initiative expected to achieve? Maximum 8 lines 
The objective of reviewing the ESAs' powers is to put in place an effective and efficient supervision of the EU 
financial  and capital  markets,  in  particular with regard  to cross-border  activities  and  entities.  This  will  enhance 
financial  stability,  appropriate  protection  of  consumers  and  investors  and  the  proper  functioning  of  financial 
markets  in  the  Union.  The  objective  of  reviewing  the  ESAs'  governance  structure  is  to  ensure  that  they  are 
incentivised  to  effectively  apply  their  powers  and  carry  out  their  tasks  in  line  with  their  mandates,  and  to  take 
swift  decisions  in  the  EU  interest  so  that  the  ESAs  have  the  appropriate  governance  structure  to  also  face 
upcoming challenges. The objectives of reviewing ESAs funding are to ensure sufficiency of resources in view 
of the ESAs' tasks and mandate, as well as proportionality of the costs that all contributing parties have to bear.   

What is the value added of action at the EU level? Maximum 7 lines  
Cross-border  integration  of  financial  markets  increases  the  availability  of  investment  opportunities,  improves 
funding  and  risk  management  services  for  the  benefit  of  the  EU  economy.  Enhancements  of  the  ESAs' 
framework  will  promote  market  integration  and  ensure  it  takes  place  in  a  safe  and  sound  supervisory 
environment. Because how the ESAs operate is enshrined in EU law, only EU level action can provide for the 
desired improvements. 

B. Solutions 

What  legislative  and  non-legislative  policy  options  have  been  considered?  Is  there  a  preferred 
choice or not? Why? Maximum 14 lines  
The  identified  problems  in  the  areas  of  ESAs  powers,  governance  and  funding  call  for  amending  the  ESA 
Regulations  and  also  selected  sectoral  legislative  acts.  In  the  area  of  powers  the  preferred  option  involves 
clarifying and strengthening certain existing powers and attributing new powers to the ESAs in targeted areas.  
This reflects the importance of cross-border  activities and  the growing  acquis in the area of financial services. 
The  latter  concerns  in  particular  attributing  ESMA  with  powers  vis-à-vis  data  reporting  service  providers, 
European  long-term  investment  funds  (ELTIFs)  and  EU  label  collective  investment  undertakings  or  managers 
(EuVECA and EuSEF) critical benchmarks, certain prospectuses and certain benchmarks. 
In  the  area  of  governance  the  preferred  option  encompasses:  adjusting  the  scope  of  decision  making  of  the 
Board of Supervisors; replacing the Management Board by an Executive Board composed of independent full-
time  members  and  providing  it  with  a  stronger  role  in  decision-making  on  certain  non-regulatory  tasks; 
enhancing the powers to the Chairperson and appointing him/her externally.    
The current funding regime would be replaced with a mixed funding model combining contributions from the EU 
budget  and  contributions  by  the  industry  which  would  ensure  sufficiency  of  the  resources  in  view  of  the 
increasing tasks for the ESAs and proportionality in distributions of the costs. 

Who supports which option? Maximum 7 lines  

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Stakeholder views on strengthening and attributing the ESAs with new powers are split.  Other EU institutions 
have previously expressed support to strengthening and attributing new powers to the ESAs.  Respondents to 
the  public  consultation  pronounced  themselves  only  on  CCPs,  data  services  providers  and  certain  EU  funds.  
Most  respondents  did  not  reply  to  the  question  on  direct  supervision.    Stakeholders  across  the  board 
(international  organizations,  EU  institutions,  industry  and  some  public  authorities)  support  adjustments  in  the 
governance model which aim at more efficiency and better incentive-mechanisms.  The changes in the funding 
model and shifting towards industry funding are supported mainly by the Parliament and to a more limited extent 
among  public  authorities.    Most  stakeholders  do  not  have  insight  into  the  functioning  of  the  ESAs  funding 
arrangements or internal governance.   

C. Impacts of the preferred option 

What are the benefits of the preferred option (if any, otherwise main ones)? Maximum 12 lines                                       
The centralisation of certain tasks  and powers  to the ESAs would lead to considerable gains in efficiency and 
effectiveness  of  supervision  across  the  EU.  The  preferred  option  would  reduce  the  costs  for  business  and 
national competent authorities; lead to more uniform application of EU law and limit the risk of misinterpretation. 
Adding  independent,  permanent  members  to  the  ESAs'  Boards  introduces  an  exclusive  EU  perspective  in  the 
decision-making procedure, counterbalancing the views of representatives of national competent authorities who 
are more likely to face conflicts of interest. Permanent members would also ensure more continuity and a longer-
term  perspective  in  the  ESAs'  decision-making.  Attributing  voting  rights  to  the  Chairperson  would  enhance 
his/her authority. The mixed model of funding ensures that the ESAs' budget can better respond to needs while 
keeping  the  current  budget  control  and  accountability  to  the  EU  institutions.  In  addition,  it  introduces 
proportionality in the distributions of costs.  

What are the costs of the preferred option (if any, otherwise main ones)? Maximum 12 lines                                       
The introduction of the preferred options under powers, governance and funding are expected not to adversely 
impact the EU budget. This is because the proposed funding methodology respects the ceilings provided by the 
current  MFF  while  allowing  ESAs  to  tap  the  additional  funding  they  need  from  the  private  sector.  Moreover, 
direct supervision will be funded by fees charged directly to the directly supervised entities.  For the rest, a more 
intensive use of the ESAs existing powers and possible new indirect supervisory powers will mean higher costs 
of the ESAs operations, which should however be offset by cost savings from more efficient supervision. 

How will businesses, SMEs and micro-enterprises be affected? Maximum 8 lines 
Businesses  of  all  sizes  should  benefit  from  more  integrated  financial  markets  offering  better  opportunities  for 
investment, funding and risk management and from the safety and soundness that more integrated supervision 
offers to integrated markets. Moreover, as taxpayers, they should benefit from the cost of the ESAs being levied 
on general taxpayers to a lesser extent.  For what concerns small and medium sized financial services providers, 
contributions and fees will be distributed in proportion to the size of their activities. 

Will there be significant impacts on national budgets and administrations? Maximum 4 lines 
The national competent authorities will be relieved from their current obligation to contribute to the ESAs' budget. 
Some of the changes in the allocation of decision-making powers (with a greater involvement of a newly set-up 
Executive Board) and the attribution of new direct powers to the ESAs in specific areas will limit the role of the 
national competent authorities in areas where there is a genuine EU value added.  In net terms, there should be 
either no impact on national budgets or a positive one (in terms of additional savings for no longer paying to the 
ESAs' budget). 

Will there be other significant impacts? Max 6 lines  
The reformed ESAs will be able to better fulfil their mandates which will bring additional benefits for financial 
institutions and financial market participants. The review of the ESAs will bring general benefits to the providers 
and users of financial services across and outside the EU.  The preferred options in the impact assessment in all 
sections impact directly the ESAs, the way they are funded, their governance model and their powers.  

D. Follow up 

When will the policy be reviewed? Maximum 4 lines  
The  ESA  Regulations  provide  for  evaluation  of  the  European  System  of  Financial  Supervision  (ESFS)  every 
three years, starting from the effective start of its operation. The first Commission's report was issued in 2014. 
The Commission will continue to monitor the functioning of the ESFS and to report accordingly. 

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