COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Reinforcing integrated supervision to strengthen Capital Markets Union and financial integration in a changing environment
Date: 2017-09-20
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: banking supervision, capital market, economic growth, economic integration, financial control, financial legislation, financial services, market supervision, single market

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 20.9.2017  COM(2017) 542 final   COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS   Reinforcing integrated supervision to strengthen Capital Markets Union and financial integration in a changing environment  
 
 
1. 

Introduction  

Financial  integration  lies  at  the  heart  of  the  Single  Market  and  the  Economic  and 
Monetary Union and brings important economic benefits for the euro area and the EU as 
a  whole.  After  a  set-back  due  to  the  financial  crisis,  financial  integration  in  the 
European  Union  has  been  increasing  again  since  2011.1  EU  investors  have  increased 
their  cross-border  asset  holdings.  Intra-EU  debt  and  equity  portfolio  investments 
increased by EUR 2 trillion between 2006 and 2015. Price-based indicators of financial 
integration show that overall convergence nearly doubled over that period.2  Against this 
background,  and  as  the  EU  economy  continues  to  recover,  it  is  important  to  build  on 
this  momentum  and  move  forward  with  the  necessary  steps  to  deepen  financial 
integration in the EU.  

The  importance  of  Capital  Markets  Union  and  a  stronger  Internal  Market  was 
underlined  by  President  Juncker  in  his  State  of  the  Union  Address  on  13  September 
2017.3 The European Council4 and the European Parliament5 have also repeatedly called 
for the completion of Capital Markets Union. 

The Single Market in financial services promotes jobs, growth and investment in all 
EU  Member  States,  by  channelling  savings  more  effectively  to  their  most  productive 
uses.  If  markets  are  truly  integrated,  savers  and  investors  can  obtain  higher  returns, 
while  consumers  and  businesses  can  obtain  better  financing  conditions  -  based  on  a 
more complete and competitive offering of financial instruments. In particular, financial 
integration can leverage even further the success of the Investment Plan for Europe in 
filling  the  EU's  investment  gap,  while  also  facilitating  the  transition  to  a  low-carbon, 
more resource-efficient economy.  

Continued  financial  integration  is  also  essential  for  strengthening  Economic  and 
Monetary  Union.  Deep  and  liquid  markets  increase  the  resilience  towards  adverse 
shocks and substantially facilitate private risk-sharing across borders, while at the same 
time  reducing  the  need  for  public  risk-sharing.  To  these  ends,  the  Five  Presidents' 
Report  on  Completing  Europe's  Economic  and  Monetary  Union  and  the  more  recent 
Commission  Reflection  Paper  on  Deepening  the  Economic  and  Monetary  Union  have 
called  for  completing  the  Financial  Union  –  comprising  both  a  Banking  Union  and  a 
Capital  Markets  Union  –  by  2019  so  as  to  guarantee  the  integrity  of  the  Euro  and 
improve the functioning of the Euro area and the EU as a whole. All these benefits of 

See the European Commission (2017), Staff Working Document, Economic Analysis 

1  
accompanying the Communication on Capital Markets Union Mid-term Review, Chapter 1, p. 11; 
European Commission (2017), European Financial Integration and Stability Review, May, p. 18; 
European Central Bank (2017), Financial Integration in Europe, p. 3 (FINTEC indicators). 
2  
3  
4  
5  
(2015/2634(RSP)), 9.07.2015. 

Source: ECB financial integration indicators. 
https://ec.europa.eu/commission/state-union-2017_en. 
Conclusions of the meeting of the European Council on 22-23 June 2017. 
European Parliament Resolution of 9 July 2015 on Building a Capital Markets Union 

2 

 
 
                                                            
integration  are  enhanced  by  the  new  opportunities  presented  by  technological 
developments in the financial sector (FinTech). Indeed, FinTech is set to play a key role 
in  shaping  the  future  of  the  EU  financial  sector  by  facilitating  access  to  financial 
services,  improving  operational  efficiency  and  expanding  choice.  At  the  same  time, 
technological  development  also  raises  issues  around  cyber-security  and  payment 
security that need to be adequately addressed. 

Against  this  background,  it  is  a  priority  for  the  Juncker  Commission  to  complete  the 
Banking  Union  rapidly,  and  put  in  place  all  remaining  building  blocks  for  a 
Capital Markets Union by 2019.  

To  make  this  happen,  the  EU  must  act  as  a  priority  to  strengthen  and  integrate  its 
supervisory  framework.  Strong  and  increasingly  integrated  financial  supervision  will 
play  a  key  role  in  delivering  the  benefits  and  managing  the  challenges  related  to  the 
further integration  of  EU  financial markets,  the  development  of  financial technologies 
and the role of the financial sector in supporting sustainable economic development. In 
the  Mid  Term  Review  of  the  Capital  Markets  Union6  the  Commission  therefore 
announced  proposals  for  strengthened  supervision  as  a  first  new  priority  to  accelerate 
market integration.The legislative proposals accompanying this Communication contain 
these next steps which the EU must now deliver on quickly to reinforce its supervisory 
framework.     

2.  More  integrated  supervision  to  foster  Capital  Markets  Union 

and financial integration  

Progress  in  financial  integration  will  require  a  more  integrated  EU  supervisory 
framework for two main reasons.  

-  First,  it  is  easier  to  conduct  financial  activities  across  border  if  those  activities 
are regulated and supervised consistently across all Member States.  Providers of 
financial  products  benefit  from  a  level  playing  field  across  the  Single  Market 
and  service  providers  may  expand  their  product  offerings  and  benefit  from 
economies of scale. Users of financial products and services – consumers as well 
as  businesses  –  may  benefit  from  a  wider  choice  without  concerns  about 
consumer protection or market integrity.  

-  Second, financial integration – for all its benefits – also expands the channels of 
contagion  between  Member  States  in  the  event  of  adverse  shocks,  as  we 
experienced  during  the  financial  crisis.  Inadequate  supervision  in  one  Member 
State can therefore also be a source of risk for financial market participants and 
consumers  in  other  Member  States.  Furthermore,  there  is  a  risk  that  market 

6 Communication from the Commission on the mid-term review of the capital markets union action plan 
COM(2017) 292 final. 

3 

 
 
 
                                                            
participants actively exploit such differences in supervision in order to increase 
their own short-term profits.7  

With the establishment of the European System of Financial Supervision in 2010-11 the 
EU supervisory framework has been substantially reinforced in response to the financial 
crisis.  The  European  System  of  Financial  Supervision  includes  both  micro-prudential 
supervision,  coordinated  by  the  three  European  Supervisory  Authorities,  and  macro-
prudential  supervision,  co-ordinated  by  the  European  Systemic  Risk  Board.  In 
November  2014,  the  Single  Supervisory  Mechanism  became  operational  and  is  now 
responsible for the supervision of large and systemic banks in countries participating in 
the  Banking  Union.  Resolution  of  banks  in  the  Banking  Union  has  been  entrusted  to 
another  new  European  body,  the  Single  Resolution  Board.  The  progress  made  during 
the  10  years  since  the  outbreak  of  the  worst  post-war  financial  crisis  is  significant. 
However,  the  EU  supervisory  framework  is  still  work  in  progress  and  further 
reinforcement is required in the face of new challenges linked to the ongoing process of 
financial  integration  both  within  the  EU  and  at  global  level.  More  specifically,  the 
decision of the United Kingdom to leave the EU reinforces the case for more integrated 
supervision  within  the  EU  27  and  a  reassessment  of  supervisory  relations  with  third 
countries, so as to ensure proper management of all financial-sector risks.  

The  banking  sector  already  benefits  from  consistent  supervision  by  the  Single 
Supervisory  Mechanism  within  the  Banking  Union,  in  which  19  Member  States 
participate. The geographical scope of Single Supervisory Mechanism supervision will 
extend, as additional Member States join the Banking Union. However, it is important 
that  the  Single  Supervisory  Mechanism  operates  within  a  consistent  supervisory 
framework  for  the  wider  EU.  This  will  ensure  a  level  playing  field  between  Member 
States participating in the Banking Union and non-participating Member States and will 
help  smooth  future  transitions  of  non-participating  Member  States  into  the  Banking 
Union.  To  this  end,  the  role  of  the  European  Banking  Authority  in  promoting 
supervisory convergence in the EU banking sector should be enhanced. 

With a few exceptions, EU capital markets are supervised at national level. The Five 
Presidents' Report identified a Single European Capital Markets supervisor as a longer-
term  objective  and  the  Reflection  Paper  on  the  Deepening  of  the  Economic  and 
Monetary Union announced that the first steps towards this objective should be taken in 
the  context  of  this  review  of  the  European  System  of  Financial  Supervision.  As  the 
Capital  Markets  Union  will  bring  about  further  financial  integration,  it  is  crucial  to 
strengthen  the  capacity  of  the  European  Supervisory  Authorities  to  ensure  consistent 
supervision  and  uniform  enforcement  of  the  single  rulebook.  This  will  support  well-
functioning capital markets by reducing barriers to cross-border investment, simplifying 
the business environment and reducing compliance costs for firms operating on a cross-

7 The risk of so-called "regulatory arbitrage" are of particular concern at this time, with the UK's decision 
to leave the EU inducing the financial sector to restructure its presence in the EU and to relocate certain 
activities. 

4 

 
 
                                                            
border  basis  resulting  from  divergent  implementation  of  the  rules.  From  an  investor's 
perspective, consistent supervision and uniform enforcement of the rules contributes to 
enhancing investor protection and the building confidence in capital markets.  

Moreover,  direct  supervision  by  the  European  Securities  Markets  Authority  could 
significantly contribute to ensuring consistent supervision and represents first concrete 
steps  towards  a  Single  European  Capital  Markets  Supervisor.  In  this  context,  the 
European  Parliament  has  also  emphasised  that  the  legal  and  supervisory  frameworks 
should  play  a  fundamental  role  in  avoiding  excessive  risk-taking  and  instability  in 
financial  markets,  and  underlined  that  a  strong  Capital  Markets  Union  needs  to  be 
accompanied by strong EU-wide and national supervision.8 

EU  insurance  and  pensions  markets  enable  EU  citizens  to  mitigate  risks,  plan  for 
their  retirement  and  build  up  savings  for  their  old  age,  but  also  have  the  potential  to 
boost cross-border investment in a Capital Markets Union. While it appears appropriate 
to  leave  supervision  under  the  recently-introduced  Solvency  II  framework  at  the 
national level at the current stage, further convergence of supervisory practices must be 
ensured and intensified under the auspices of the European Insurance and Occupational 
Pensions  Authority,  so  as  to  address  any  concerns  and  practical  issues  caused  by  the 
diverging application of rules by national supervisors.   

As  the  EU  strives  to  further  integrate  financial  markets,  macroprudential  oversight, 
i.e. the monitoring of risks for the stability of the financial  system as a whole, will be 
even  more  important.  The  European  Systemic  Risk  Board,  based  on  its  broad 
membership,  including  national  central  banks,  supervisors  and  European  institutions, 
needs to play an even stronger role in the future, supported by an improved governance 
structure to ensure swifter procedures.  

Importantly,  steps  towards  a  reinforced  supervision  framework  must  apply  to 
financial  markets  in  all  Member  States,  so  that  all  Member  States  can  reap  the 
benefits from more integrated financial markets while maintaining a level playing field 
across the entire EU.  

Against  this  background,  the  Commission  is  proposing  today  legislative  measures  to 
strengthen the European Supervisory Authorities and the European Systemic Risk 
Board. The proposals build on the experience of more than six years of operation, and 
on the contributions of the European Parliament, Member States, the Council, a public 
consultation  yielding  more  than  200  responses  and  an  intense  dialogue  with  all 
stakeholders concerned. 

8  
(2015/2634(RSP)), 9.07.2015 

European  Parliament  resolution  of  9  July  2015  on  Building  a  Capital  Markets  Union 

5 

 
 
                                                            
 
3. 

Key elements of a strengthened supervisory framework 

Intensified supervisory convergence 

Enhanced coordination powers will ensure convergence in the way national authorities 
supervise the financial sector and prepare the ground for further steps towards a single 
supervisor,  notably  as  regards  capital  markets.  The  European  Supervisory  Authorities 
have already contributed to more convergent and effective financial supervision with 
visible  results,  for  example  via  guidelines  to  national  supervisors,  mediating 
divergences  of  views  between  national  supervisors  or  carrying  out  peer  reviews  of 
national authorities. However, improvements in this area are required to strengthen the 
capacity of the European Supervisory Authorities to ensure consistent supervision and 
uniform enforcement of the Single Rulebook. Today's proposals strengthen the role of 
the  European  Supervisory  Authorities  as  regards  the  coordination  of  the  activities  of 
national authorities as follows: 

-  The  existing  powers  of  the  European  Supervisory  Authorities  to  ensure 
supervisory  convergence  will  be  strengthened,  for  example 
through 
independent reviews of national authorities activities, a new role in setting EU-
wide  priorities  for  supervision  and  early  intervention  in  cases  of  possible 
supervisory arbitrage. 

-  The  European  Securities  Markets  Authority  will  receive  transaction  data 
directly from market participants, so as to build significant market expertise, 
better use its supervisory powers and ensure a level playing field across the EU. 
Moreover,  the  European  Securities  Markets  Authority  will  have  a  reinforced 
coordination  role  to  establish  itself  as  an  investigatory  hub  for  market  abuse 
cases with a cross-border element.  

-  The European Insurance and Occupational Pensions Authority will have a 
greater role in coordinating the authorisation of insurance and reinsurance 
companies'  internal  risk  measurement  models  so  as  to  avoid  the  risk  of 
divergent supervisory standards and outcomes. 

-  In  parallel  with  these  measures,  the  Commission  proposes  that  the  European 
Supervisory  Authorities' 
and 
procedures 
recommendations  will  be  enhanced    to  reflect  the  importance  of  these 
instruments. This reflects a consistent demand from many stakeholders. To this 
end,  the  European  Supervisory  Authorities  will  be  required  to  conduct  cost-
benefit analysis and the relevant stakeholder groups will have the right to seek 
action  by  the  Commission  if  they  consider  that  the  instruments  exceed  the 
competences conferred on the European Supervisory Authorities by EU law.  

guidelines 

issue 

to 

A  solid  basis  for  the  governance  and  funding  of  the  European  Supervisory 
Authorities 

6 

 
 
 
 
 
In order to fulfil their mandates and ensure supervisory convergence within the EU, the 
European Supervisory Authorities must be equipped with a solid governance structure. 
On the one hand, it is appropriate to maintain the important role of national authorities 
who will continue to set the overall direction and decide on regulatory matters. On the 
other  hand,  the  European  Supervisory  Authorities  should  also  have  an  independent 
Executive  Board  with  full-time  members  that  will  ensure  effective,  impartial  and  EU-
oriented decisions with regard to the coordination of supervisory practices. 

7 

 
 
 
 
Proposed new governance 

Moreover,  today's  proposals  ensure  that  the  Parliament  and  Council  can  endow  the 
European Supervisory Authorities with the necessary budgetary means in light of their 
new  tasks  and  responsibilities.  While  national  experience  shows  that  an  element  of 
public  financing  can  be  useful  for  the  well-functioning  of  supervisory  authorities  and 
should  thus  be  maintained,  it  is  nevertheless  appropriate  to  ensure  more  diversified 
sources  of  funding  for  the  European  Supervisory  Authorities.  Industry  and  market 
participants that benefit most directly from the supervisory convergence fostered by the 
European  Supervisory  Authorities  should  play  a  much  more  significant  role  in  their 
financing. Contributions should be fair and proportionate to the benefit the industry and 
market  participants  concerned  enjoy  from  the  work  of  the  European  Supervisory 
Authorities. 

8 

 
 
 
 
 
 
 
Changes to the funding of the European Supervisory Authorities 

Towards a Single European Capital Markets Supervisor 

Direct  supervision  at  EU  level  is  in  many  cases  the  most  effective  way  of  delivering 
supervisory  convergence,  thereby  removing  barriers  to  cross-border  activities  and  the 
scope for regulatory arbitrage. However, at present, direct supervision by the European 
Securities Markets Authority applies to only a very limited number of market operators 
and activities, i.e. for credit rating agencies and trade repositories. The Commission has 
already  recently  proposed  a  more  integrated  EU  supervisory  mechanism  for  Central 
Counterparties,9  and  a  strong  role  for  the  European  Insurance  and  Occupational 
Pensions Authority in the authorisation of the recently proposed pan-European personal 
pension  product.10  Extending  direct  supervision  to  other  areas  can  therefore  make  a 
significant  contribution  to  Capital  Markets  Union.  At  the  same  time,  the  subsidiarity 
principle  and  the  continued  role  of  national  authorities  for  example  in  the  area  of 
consumer protection must be taken into account.  

On this basis, the Commission is  proposing to extend direct supervision to selected 
capital  market  sectors.  These  areas  have  been  selected  based  on  the  extent  to  which 
direct  supervision  can  reduce  cross-border  barriers  and  promote  further  market 
integration, the efficiency gains that can be reaped by building specialised expertise at 
the  EU  level  and/or  the  technical  feasibility  of  direct  supervision  (considering  for 
example the extent to which sectors are governed by directly applicable legislation, i.e. 

9 Proposal for a Regulation amending Regulation (EU) No 1095/2010 establishing a European 
Supervisory Authority (European Securities and Markets Authority) and amending Regulation (EU) No 
648/2012 as regards the procedures and authorities involved for the authorisation of CCPs and 
requirements for the recognition of third-country CCPs COM/2017/0331 final  
10 Proposal for a Regulation on a pan-European Personal Pension Product (PEPP) COM(2017) 343 final 

9 

 
 
 
 
                                                            
 
Regulations as opposed to Directives). The new areas proposed for direct supervision by 
the European Securities Markets Authority are presented in the table below in italics: 

Area  

Legislation 

Capital market entry  

Prospectuses 

Capital market actors  Harmonised collective 

investment funds 
(EuVECA, EuSEF and 
ELTIF) 
Central Counterparties 
(CCPs) 

Capital market 
infrastructure  

Capital market data & 
information  

Credit Rating Agencies 
(CRAs) 

Trade Repositories 
(TRs) 

Data reporting 
services providers 

Benchmarks 

European Securities 
Markets Authority direct 
supervisory powers for 
EU entities 
Approval of certain 
categories of prospectuses 
by EU issuers  

Authorisation and 
supervision of funds which 
are regulated at the EU 
level 
Supervisory powers in 
relation to CCPs 
(Commission proposal of 
June 2017) 

Registration and 
supervision of CRAs 
(already existing) 
Registration and 
supervision of trade 
repositories (already 
existing) 
Registration and 
supervision of data 
reporting service providers 
Supervision of critical 
benchmarks   

European Securities 
Markets Authority 
powers for third country 
entities 
Approval of all 
prospectuses drawn up 
under EU rules by third 
country issuers 
N/a 

Recognition and 
supervisory powers for 
third country CCPs (already 
existing; reinforced in 
Commission proposal of 
June) 
Endorsement of third 
country CRAs (already 
existing) 
Recognition of third 
country TRs (already 
existing) 

N/a 

Endorsement and 
supervision of third country 
benchmarks 

These proposals will be further complemented by the upcoming Commission legislative 
proposals to review the prudential treatment of investment firms. As part of this review, 
the Commission intends to propose to align the regulatory and supervisory treatment of 
certain large investment firms with the one applying to large credit institutions. Among 
other  things,  this  will  ensure  that  such  firms  established  within  the  Member  States 
participating in the Banking Union can become subject to supervision by the European 
Central Bank in its supervisory capacity, the Single Supervisory Mechanism. 

Making macro-prudential supervision more efficient 

The Commission is proposing targeted amendments to strengthen the efficiency of the 
European Systemic Risk Board, thereby reinforcing macro-prudential coordination and 

10 

 
 
 
 
allowing the European Systemic Risk Board to better fulfil its mission. In particular, the 
Commission  is  proposing  to  confirm  the  existing  arrangement  that  the  European 
Systemic Risk Board is chaired by the President of the European Central Bank, while 
reinforcing the position of the Head of the Secretariat. Finally, the proposal modifies the 
organisation of the European Systemic Risk Board to reflect more recent changes in the 
EU institutional environment, most notably with regard to the creation of the Banking 
Union. 

4. 

Integrate  sustainable  finance  considerations 
supervision  

into  financial 

The  EU  must  continue  to  strengthen  its  global  leadership  in  making  finance  work 
towards the goals set by the United Nations 2030 Agenda for Sustainable Development, 
the Paris Agreement and the Sendai Framework for Disaster Risk Reduction. Given the 
scale of investments needed to move the EU economy towards low-carbon, resource-
efficient  and  risk-proofed  investments  and  more  sustainable  growth  over  the  next 
decades,  it  is  indispensable  to  mobilise  and  reorient  private  capital  resources  to  more 
sustainable investments. This requires a comprehensive, deep rethinking of the current 
financial  framework  and  a  different  risk-return  approach  of  capital  markets  and 
investors.  

The  Commission  will  present  in  early  2018  an  ambitious  Action  Plan  on  sustainable 
finance with regulatory measures.  

The  High  Level  Expert  Group  on  sustainable  finance  established  by  the  Commission 
pointed  out  in  its  interim  report  that  environmental,  social  and  governance  risks  –  for 
example,  unprecedented  and  growing  climate-related  risks  –  are  not  yet  properly 
integrated  into  financial  risk  assessment  processes,  and  that  the  present  review  of  the 
European  Supervisory  Authorities  provides  an  excellent  opportunity  to  clarify  and 
enhance  their  role  in  assessing  environmental,  social  and  governance  risks  in  order  to 
secure the long-term stability of Europe’s financial sector and benefits for a sustainable 
economy at large. Indeed, the European Supervisory Authorities can play an important 
role  in  creating  a  regulatory  and  supervisory  framework  that  supports  mobilising  and 
orienting private capital flows towards sustainable investments while ensuring financial 
stability. 

As a first step towards a more comprehensive strategy, the proposals accompanying this 
Communication  specifically  require the European Supervisory  Authorities  to  take into 
account  of  to  environmental,  social  and  governance  factors  arising  within  the 
framework  of  their  mandate.  For  example,  this  will  enable  the  Authorities  to  monitor 
how  financial  institutions  identify,  report,  and  address  environmental,  social  and 
governance  risks,  thereby  enhancing  financial  viability  and  stability.  The  European 
Supervisory Authorities can also provide guidance on how sustainability considerations 
can be effectively embodied in relevant EU financial legislation, and promote coherent 
implementation of such rules upon adoption.  

11 

 
 
5. 

Adapting the supervisory framework to harness the potential of 
FinTech 

FinTtech  is  set  to  play  a  key  role  in  shaping  the  future  of  the  EU  financial  sector  by 
facilitating  access  to  financial  services,  offering  new  ways  of  investment  in  firms, 
improving  operational  efficiency  and  expanding  choice.  Use  of  digital  technologies  is 
transforming  the  financial  sector,  producing  consumer  benefits,  improving  businesses' 
access to finance and offering vast opportunities for FinTech start-ups to scale-up. The 
pace  of  innovation  in  financial  services  has  increased  significantly  in  recent  years.  In 
developing  the  Financial  Union,  the  opportunities  of  financial  innovation  have  to  be 
used to the fullest extent, but new risks also have to be managed.  

The regulation and supervision underlying Banking Union and Capital Markets Union 
must  be  technology-neutral  and  proportionate,  allowing  for  innovation  and  further 
technological  developments  and  fostering  an  integrated  market  for  digital  financial 
services as part of the EU's Digital Single Market without constraints to economies of 
scale and scope.  

As  financial  services  become  more  technology  and  data  dependent,  regulators  and 
supervisors  must  become  familiar  with  these  technologies  in  order  to  promote  a 
consistent  approach  to  both  the  benefits  and  potential  risks,  and  to  promote  sound 
competition. . 

Novel approaches present a challenge to supervisors as new technologies and alternative 
business models and services raise complex regulatory and supervisory questions. It is 
of  great  importance  to  enable  supervisors  to  gain  knowledge  from  working  with 
innovative  firms  and  learn  about  new  technologies  and  business  models.  It  is  equally 
important  that  national  regulators  and  supervisors  across  Member  States  coordinate 
their  responses  in  order  to  avoid  creating  barriers  to  an  integrated  market  for  digital 
financial services.  

Following its FinTech public consultation,11 the Commission will present in early 2018 
an  EU  Action  Plan  setting  out  what  detailed  actions  must  be  taken  to  address  these 
challenges and allow for an integrated market for digital financial services.  

As  a  first  step  in  that  direction,  the  EU's  integrated  supervisory  framework  must  be 
adjusted to take into account the new developments. The proposals accompanying this 
Communication  will  require  the  European  Supervisory  Authorities  to  take  account  of 
issues  related  to  innovation  and  technological  development  while  carrying  out  their 
tasks.  

Another challenge taken into account in the proposals consists in national technological 
innovation  instruments  and  tools  such  as  innovation  hubs  or  sandboxes  set  up  by 

11  

https://ec.europa.eu/info/finance-consultations-2017-fintech_en 

12 

 
 
                                                            
national  supervisors.  According  to  the  proposal  the  European  Supervisory  Authorities 
would be tasked to promote supervisory convergence with specific attention being paid 
to innovation and technologies, through exchange of information and best practices, as 
well  as  guidelines  and  recommendations  where  appropriate.  The  Authorities  will  for 
example  be  invited  to  promote  technology  literacy  within  all  national  supervisory 
authorities alongside information-sharing on cyber threats, incidents and attacks. 

Technology dependence also increases cybersecurity concerns. Security and operational 
integrity  of  financial  services  and  their  providers  are  changing  rapidly  and  require  a 
more co-ordinated response on the part of European regulation and supervision.  

Through  more  coordinated  approaches  towards  cybersecurity  and  resilience  measure, 
the  ESAs  will  also  contribute  to  enhancing  security  and  integrity  of  the  European 
financial  sector.  The  role  of  Information  Sharing  and  Analysis  Centres  is  particularly 
important  in  creating  the  necessary  trust  for  sharing  information  about  cybersecurity 
threats between financial services and public sector. 

6.   Conclusion 

As Economic growth in Europe is getting on a steadier path, it is time to use the current 
window of opportunity in order for the EU to adjust its structures to make the Economic 
and Monetary Union more sustainable over the long run and boost the Single Market. 
Stronger financial integration is key in this context and will bring important benefits for 
the  European  Union,  its  citizens  and  businesses.  Beyond  the  ongoing  process  of 
integration, the financial sector must adapt and adjust to changes linked to technological 
advances and its full role in order to ensure a more sustainable path for investments and 
economic development.   

The  quality  and  convergence  of  EU  supervision  will  be  key  in  delivering  the  benefits 
and  managing  the  challenges  in  the  context  of  these  financial-sector  relevant 
developments. The legislative proposals presented today alongside this Communication 
include concrete steps in order to accelerate supervisory convergence across all market 
segments and towards centralised and single supervision in capital markets. Moreover, 
they constitute first legislative steps to strengthen further the EU's leadership in the area 
of sustainable investment and finance and to manage the opportunities and challenges of 
FinTech. 

The Commission invites the European Parliament and the Council to discuss and agree 
these proposals as a matter of priority, in order to ensure their entry into force before the 
end  of  the  current  legislative  term  in  2019.  At  the  same  time,  the  Commission  will 
continue its close dialogue with all relevant stakeholders in this important area. 

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