REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL On the operation of the European Supervisory Authorities (ESAs)
Date: 2022-05-23
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: EU financing, European Banking Authority, European Insurance and Occupational Pensions Authority, European Securities and Markets Authority, banking supervision, capital markets union, consumer protection, financial legislation, financial supervision, operation of the Institutions

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 23.5.2022  COM(2022) 228 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL On the operation of the European Supervisory Authorities (ESAs)    
 
 
1.  INTRODUCTION  

The  three  European  Supervisory  Authorities  (ESAs)  –  the  European  Banking  Authority 
(EBA),  the  European  Insurance  and  Occupational  Pensions  Authority  (EIOPA),  and  the 
European  Securities  and  Markets  Authority  (ESMA)  –  were  created  in  2011  in  response  to 
the  global  financial  crisis  that  unfolded  in  2008.  They  were  set  up  to  help  tackle  the 
shortcomings  in  supervision  revealed  by  the  financial  crisis  and  to  restore  full  trust  in  EU 
financial markets.  

More than 10 years after their creation, the ESAs now have a very convincing track-record in 
these areas. They are key actors in shaping the single market for capital and financial services 
by contributing to implementing EU legislation in this area and by coordinating the work of 
national  supervisors.  They  have  also  successfully  taken  on  new  tasks  in  the  recovery  and 
resolution frameworks1. The recent COVID-19 crisis has proven that the European System of 
Financial Supervision is  functioning well, and the work of the ESAs has been an important 
part of this achievement.  

Also in the current geopolitical context, with Russia’s war against Ukraine, the ESAs play an 
important  role,  including  in  the  implementation  of  sanctions  by  EU  financial  market 
operators.  Moreover,  the  ESAs  monitor  the  impact  on  EU  financial  institutions  and  follow 
financial market developments closely, notably with regard to energy, food commodity and 
commodity derivative markets.  

During the past decade, the ESAs’ activities have focused on building the single rulebook for 
financial  services  and  fostering  supervisory  convergence.  Excellent  progress  has  been 
achieved  in  these  areas,  but  there  is  still  a  need  for  continued  and  appropriately  targeted 
efforts to promote a genuine Capital Markets Union. A financial system with multiple centres 
across  the  EU  increases  the  need  for  an  improved  single  rulebook  and  greater  supervisory 
convergence. 

In  this  context,  the  Commission  published  its  action  plan  for  Capital  Markets  Union2  on 
24 September 2020.  In this  action plan, the Commission  committed to:  (i)  work towards an 
improved  single  rulebook by  assessing  the need  for further harmonisation  of  EU rules;  and 
(ii) take stock of what has already been achieved in supervisory convergence. 

In addition, Article 81 of the three ESA Regulations3 requires the Commission to carry out a 
review of the Regulations. This review must be in the form of a published general report on 
the experience acquired from the operations of the ESAs and the procedures laid down in the 
ESA Regulations. In addition to the general requirement for a review of the performance of 

1  Directive  2014/59/EU  of  the  European  Parliament  and  of  the  Council  of  15  May  2014  establishing  a 
framework  for  the  recovery  and  resolution  of  credit  institutions;  Regulation  (EU)  2021/23  of  the  European 
Parliament and of the Council of 16 December 2020 on a framework for the recovery and resolution of central 
counterparties.  
2 Capital Markets Union 2020 Action Plan_en 
3  Regulation  (EU)  No  1093/2010  of  the  European  Parliament  and  of  the  Council  of  24  November  2010 
establishing the European Banking Authority. 
Regulation  (EU)  No  1094/2010  of  the  European  Parliament  and  of  the  Council  of  24  November  2010 
establishing the European Insurance and Occupational Pensions Authority.  
Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 
establishing the European Securities and Markets Authority. 

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the three ESAs, there are specific review clauses in the ESMA4 and EBA5 Regulations. 

Amendments to the ESA Regulations entered into application on 1 January 20206 (hereinafter 
referred  to  as  ‘2019  ESA  review’).  These  amendments  brought  changes  to  existing 
convergence  tools  and  governance  provisions.  The  amendments  also  added  new  direct-
supervision  mandates  for  ESMA7.  The  first  review  following  these  amendments  focuses 
particularly on whether – and to what extent – these amendments have benefited EU financial 
supervision. 

To prepare this report, the Commission engaged in a broad consultation process. It carried out 
a  targeted  consultation  that  received  107  replies,  and  it  also  asked  for  feedback  from  the 
ESAs.  It  also  organised  a  public  event  and  held  various  stakeholder  meetings.  The 
Commission  has  published  a  feedback  statement8  providing  a  detailed  summary  of  the 
responses  received during this  consultation.  In broad terms,  respondents  to  the consultation 
gave  a  positive  assessment  of  the  impact  of  the  ESAs  on:  (i)  financial  stability;  (ii)  the 
functioning  of  the  internal  market;  (iii)  the  quality  and  consistency  of  supervision;  (iv)  the 
strengthening  of 
investor 
protection; (vi) sustainable finance; and (vii) digital finance.  

international  supervisory  coordination;  (v)  consumer  and 

Many  respondents  observed  that  it  was  still  too  soon  to:  (i)  evaluate  fully  the  changes  that 
were agreed in 2019 and that had only entered into application in early 2020; and (ii) consider 
further  changes  given  the  short  period  of  time  since  the  implementation  of  the  last 
amendments. In addition, respondents pointed to the extraordinary circumstances caused by 
COVID-19 that have occupied the attention of the ESAs – in particular during large parts of 
2020. Despite these reservations, most respondents were still able to provide an assessment. 
By  and  large,  the  feedback  was  clearly  positive  about  the  changes  introduced  by  the  ESA 
review,  even  though  a  number  of  respondents  considered  that  more  changes  were  needed. 
The responses also revealed that the divergent opinions that surfaced in the 2019 ESA review 
are still present. The vast majority of respondents agree that the ESAs reacted appropriately 
in  the COVID-19  crisis  and that the current  powers of the  ESAs have proven to  be largely 
sufficient.  According  to  the  feedback,  the  ESAs’  coordination  seems  to  work  satisfactorily. 
However, some stakeholders consider that the ESAs' coordinating role has not been used to 
its full potential. 

This  report  summarises  the  findings  from  the  consultation  and  from  other  stakeholder 
contacts.  It  focuses  on  the  main  areas  under  review:  (i)  supervisory  convergence;  (ii) 
governance; (iii) direct supervision; and (iv) funding. It also includes a section on the single 

4 Articles 81(2b) and 81(2c) of the ESMA Regulation ask the Commission to assess the potential supervision of 
non-EU  trading  venues  and  central  securities  depositories.  The  potential  supervision  of  central  securities 
depositories has been addressed as part of the ongoing review of the Central Securities Depository Regulation 
(https://ec.europa.eu/info/publications/220316-central-securities-depositories-regulation-review_en),  while  the 
potential supervision of non-EU trading venues will be assessed at a later stage. 
5  Article  81(2b)  of  the  EBA  Regulation  asks  the  Commission  to  assess:  (i)  the  new  tasks  in  both  anti-money 
laundering and countering the financing of terrorism (AML/CTF)  that were conferred on the EBA; and (ii) the 
possibility  of  conferring  specific  tasks  to  an  existing  or  a  new  dedicated  EU-wide  agency.  This  has  been 
addressed  in  the  AML/CTF  legislative  package  (https://ec.europa.eu/info/publications/210720-anti-money-
laundering-countering-financing-terrorism_en). 
6  2019  ESA  review:  Regulation  (EU)  2019/2175,  which  reviews  the  powers,  governance  and  funding  of  the 
ESAs. 
7 The new direct-supervision mandates entered into application in January 2022. 
8  https://ec.europa.eu/info/files/2021-esas-review-summary-of-responses_en 

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rulebook, as announced in the Commission’s 2020 action plan on Capital Markets Union.  

2.  SUPERVISORY CONVERGENCE 

Background and findings 

The  2019  ESA  review  introduced  a  number  of  changes  to  strengthen  supervisory 
convergence.  In  particular,  the  ESA  review  introduced:  (i)  a  strengthened  peer-review 
process; (ii) Union strategic supervisory priorities; and (iii) an EU supervisory handbook. It 
also  introduced  explicit  rules  to  frame  instruments  already  used  by  the  ESAs,  such  as  ‘no-
action’ letters; coordination groups; and questions and answers (Q&A).  

In the targeted consultation, respondents from both public authorities and the finance industry 
rated  very  positively  the  contribution  of  the  ESAs  to  promoting  a  common  supervisory 
culture and consistent supervisory practices. Most respondents expressed reasonably positive 
views about the recent changes9, but argued that it was still too early to assess the full effect 
of these changes on the convergence outcomes. They said that more time was needed to form 
a  view  on  whether  the  amendments  would  be  sufficient  for  achieving  supervisory 
convergence. 

The majority of respondents did not see the need to amend or add a tool to the ESAs’ toolkit 
for achieving supervisory convergence. These respondents observed that the ESAs have not 
used their existing tools to their full potential. In addition, some respondents highlighted the 
effectiveness  of  informal  supervisory  convergence  tools  developed  by  the  ESAs,  such  as 
ESMA’s common supervisory actions10.  

However, respondents also acknowledged that more efforts were needed to reach the goal of 
supervisory  convergence.  They  considered  the  specificities  of  local  markets  and  different 
legal environments (e.g. in civil, commercial and company law) to be the main obstacles to 
greater supervisory convergence. Sanctions were mentioned as the area where there is most 
room for improvement in convergence  (e.g.  National  Competent  Authorities should impose 
similar sanctions if there are similar breaches of EU legislation).  

Many respondents observed that the new Q&A process has become slower and less efficient. 
Respondents  cited  two  reasons  for  this  problem.  Firstly,  they  said  it  was  difficult  to 
distinguish  which  questions  require  an  interpretation  of  Union  law,  and  thus  need  to  be 
answered by the Commission. Secondly, they said that the process was slowed down because 
the Commission needed to formally adopt a decision on this category of questions. Similarly, 
many  respondents  observed that  the conditions for the new mechanism of no-action letters, 

9 I.e. peer reviews, Union strategic supervisory priorities, new ESA tasks in fostering supervisory independence, 
breach of Union law, and mediation.  
10 For example, mentioned in this context were: ESMA’s common supervisory action (e.g. on UCITS liquidity 
management);  the  Supervisory  Coordination  Network;  the  Senior  Supervisors  Forum;  ESMA’s  risk-based 
approach  towards  supervisory  convergence  (‘Heatmap’);  discussion  of  real  supervisory  cases;  EIOPA’s 
promotion of bilateral and multilateral exchanges of information (e.g. the cross-border notification project); the 
EBA’s annual plan and report on supervisory convergence; and the EBA’s SREP guidelines. 

3 

 
 
 
 
 
 
 
 
 
 
                                                      
introduced by the 2019 ESA review, made use of this mechanism very difficult11. They noted 
that  due  to  the  non-binding  nature  of  no-action  letters,  market  participants  cannot  rely  on 
them,  as  there  is  no  guarantee  that  National  Competent  Authorities  will  act  on  them  in  a 
harmonised  way.  Instead,  some  respondents  said  that  the  ESAs  should  be  able  to  take  a 
decision compelling competent authorities to disapply – or not enforce – a provision of Union 
law in some circumstances. Nevertheless, respondents recognised that, in instances where the 
conditions of no-action letters were not met, similar outcomes have been achieved with other 
tools such as deprioritisation statements12, which invite National Competent Authorities not 
to prioritise actions in relation to a given requirement.  

Assessment of the Commission 

The  ESAs  have  made  an  important  contribution  to  improving  supervisory  convergence 
through  the  use  of  their  toolkit.  Guidelines,  recommendations,  and  Q&As  have  proven 
particularly effective in spelling out the single set of rules for financial services and markets 
(‘single rulebook’) and thus achieving convergent supervisory outcomes. In recent times, the 
ESAs have rightly started to shift the focus of their work from developing the single rulebook 
to  achieving  convergence  in  its  application  and  supervision.  The  Commission  welcomes  a 
greater  focus  by  the  ESAs  on  compliance  with  the  rules.  The  risk-based  approach  towards 
supervisory  convergence  –  whereby  the  ESAs  choose  the  topics  on  which  the  convergence 
work should focus on in the next 1-2 years – is also welcome13.  

Overall, the tools available to the ESAs, as improved by the 2019 ESA review, seem to be fit 
for  purpose.  Despite  the  recent  nature  of  the  changes  that  started  to  apply  in  2020,  it  is 
already  possible  to  see  a  certain  positive  impact  in  this  area.  For  example,  the  new  peer-
review process proved to be an effective ad-hoc investigation tool during its first use in the 
Wirecard  case14.  However,  the  Commission  considers  that  there  may  have  been  other 
instances apart from the above case where an ad-hoc peer review would have been warranted. 
Moreover, since peer reviews are resource intensive, the ESAs should carefully assess which 
topics  most  merit  a  peer  review.  For  example,  they  could  base  their  decision  on  an  initial 
assessment of where the negative impact of supervisory divergence is the greatest.  

The Commission agrees that informal tools15, which the ESAs have developed, can usefully 
foster convergence. An example of this can be seen in the common supervisory actions used 

of 

for 

the 

See 

into 

new 

disclosures 

application 

sustainability-related 

https://www.esma.europa.eu/sites/default/files/library/esma70-156-
https://www.esma.europa.eu/sites/default/files/library/esma35-43-

11 A practical example of a no-action letter is that adopted by ESMA on 29 April 2020 in connection with the 
benchmarks: 
entry 
https://www.esma.europa.eu/press-news/esma-news/esma-issues-no-action-letter-new-esg-disclosure-
requirements-under-benchmarks. 
12 
examples: 
some 
4714_statement_access_etds_2021.pdf; 
2632_statement_suspension_rts_27.pdf. 
13 See, for example, ESMA’s risk-based approach towards supervisory convergence (‘Heatmap’). 
14 ESMA conducted an ad-hoc peer review to assess the supervisory response in the financial-reporting area by 
BaFin and the Financial Reporting Enforcement Panel (FREP) to the events leading to the collapse of Wirecard 
AG.  The  peer  review  identified  a  number  of  shortcomings.  These  relate  to:  the  independence  of  BaFin  from 
issuers  and  government;  the  market  monitoring  by  both  BaFin  and  the  FREP;  examination  procedures  of  the 
FREP;  and  the  effectiveness  of  the  supervisory  system  in  the  area  of  financial  reporting.  The  peer  review 
provided  recommendations  to  address  these  shortcomings:  esma42-111-5349_fast_track_peer_review_report_-
_wirecard.pdf (europa.eu). 
15  These  tools  are  cooperation  practices  to  foster  convergence  that  the  ESAs  have  developed  but  that  are  not 
further specified in the founding regulations. 

4 

 
 
 
 
 
 
                                                      
by  ESMA16.  These  are  useful  for  creating  transparency  and  a  common  supervisory  culture. 
They can also be effective for getting a holistic view of industry practices and the supervision 
of  these  practices  across  the  EU.  To  the  extent  that  shortcomings  become  apparent  when 
those  informal  tools  are  used,  such  findings  should  ideally  trigger  national  supervisors  to 
intervene and take action. 

However, there is also room for improvement. Firstly, some of the tools at hand might not be 
being used to their fullest to tackle supervisory discrepancies. For example, the procedure for 
breach of Union law has been very rarely used – as pointed out in two recent ECA audits17. 
Moreover,  the  tools  should  be  used  across  the  board.  For  example,  and  as  flagged  by 
stakeholders,  more  convergence  would  be  desirable  in  enforcement  in  general  and  in 
sanctions more specifically18. Nevertheless, respondents to the consultation acknowledge that 
there are certain limits to what is achievable in this field due to: (i) limited harmonisation in 
the area of sanctions; and (ii) the different legal systems of Member States.  

Taking into account the feedback from the consultation that more time is necessary to fully 
assess the impact of the recent changes, the Commission will not now propose changes to the 
ESA Regulations to strengthen supervisory convergence. Instead, the Commission continues 
to encourage the ESAs to make good use of the existing instruments. 

In  addition,  the  Commission  will  consider  targeted  improvements  to  foster  supervisory 
convergence  in  sector  legislation.  This  is  to  address  specific  shortcomings  that  the 
Commission has identified or may identify in certain areas of financial markets. To this end, 
the Commission has recently proposed targeted amendments, including:  

- 

- 

- 

the Solvency  II  review proposal19, which proposes to  increase  the role of  EIOPA in 
complex cross-border cases where the supervisory authorities involved fail to reach a 
common view in a collaboration platform20; 

the  AIFMD  review  proposal21,  which  proposes  that  ESMA  would  be  tasked  with 
conducting  peer  reviews  and  analysing  notifications  of  substantial  delegation 
arrangements so that supervisors have a better overview of market practices; 

the  supervisory  data  strategy22,  which  aims  to  improve  the  consistency  and 
interoperability of the supervisory reporting system in the EU (this will also facilitate 
coordination between supervisors and contribute to supervisory convergence);  

16 With this tool, NCAs agree to assess simultaneously whether market participants in their jurisdictions adhere 
to the rules in their day-to-day business, based on a common methodology developed together with ESMA. 
17  Special  Report  13/2021:  EU  efforts  to  fight  money  laundering  in  the  banking  sector  are  fragmented  and 
implementation is insufficient; Special report 04/2022: Investment funds EU actions have not yet created a true 
single market benefiting investors. 
18 See responses to the consultation and also  ESMA’s 2020 reports on  the use of sanctions for UCITS and on 
sanctions under AIFMD. A Commission report under Article 99(3) of the UCITS Directive is forthcoming. 
19 https://ec.europa.eu/info/publications/210922-solvency-2-communication_en 
20 According to Article 152b of Directive 2009/138/EC, where cross-border insurance activities are significant 
with  respect  to  the  market  of  the  host  Member  State  and  require  close  collaboration  between  the  supervisory 
authorities of the home Member State and the host Member State, especially where an insurer might risk being 
in financial difficulties to the detriment of policyholders and third parties, EIOPA should set up and coordinate 
collaboration platforms. 
21 https://ec.europa.eu/info/publications/211125-capital-markets-union-package_en  

5 

 
 
 
 
 
 
 
 
                                                      
- 

the  CRD  VI  proposal23,  which  would  harmonise  sanctioning  powers  and  introduce 
enforcement  tools  (e.g.  periodic  penalty  payments)  at  the  disposal  of  European 
supervisors.  

To address specific problems, the Commission will also continue to propose targeted changes 
in upcoming reviews of sector legislation as necessary.  

On the Q&A process, the power to issue (non-binding) interpretations of Union law lies with 
the  Commission  as  the  guardian  of  the  Treaties  rather  than  with  the  ESAs.  However,  the 
Commission notes the feedback from stakeholders, and will continue to try to streamline the 
Q&A process in practice, together with the ESAs. The Commission also notes that, although 
Q&As  are  often  a  useful  tool  to  clarify  aspects  of  legislation,  they  are  sometimes  used  by 
stakeholders to obtain guidance for their own very specific situations, and are not necessarily 
in the general interest. 

Although it is mindful of the concerns raised by stakeholders, the Commission considers that 
more time is needed to assess the effectiveness of the new provision on no-action letters (and 
the  potential  use  cases  of  this  provision)  before  considering  whether  any  fine  tuning  is 
needed. That said, some stakeholders seem to wish for extensions to the scope and effect of 
this  provision  that  would  risk  conflicting  with  general  principles  of  Union  law.  In  this 
context,  the  Commission  has  recently  proposed  ways  to  ensure  that  specific  provisions  of 
Union  law  do  not  apply  under  certain  circumstances  such  as  in  the  MIFIR  proposal24,  thus 
seeking to achieve on a case-by-case basis some of the flexibility of the framework sought by 
those stakeholders. 

More generally, the Commission invites the ESAs to assess further improvements that can be 
implemented  in  the  short  term  and  that  would  not  require  any  change  to  the  legislative 
framework.  To  that  end,  stakeholders  raised  a  number  of  ideas  in  the  consultation.  The 
Commission considers that the following suggestions in particular merit further reflection. 

-  Transparency  on  how  rules  are  applied  across  the  EU  could  be  increased.  For 
example, the ESAs could create a web-based tool that would make it possible for all 
stakeholders to report cases of supervisory inconsistencies. 

-  The  focus  on  enforcement  could  be  increased  in  supervisory  convergence  tools  to 
foster  the  consistent  application  of  enforcement  measures,  including  sanctions.  A 
similar goal could be achieved by ensuring that the ESAs collect comprehensive data 
on enforcement cases across the EU. 

-  The possibility of carrying out ad-hoc peer reviews of competent authorities in case of 
events with major supervisory implications could be used to a greater extent as an ex-
post tool. In addition, greater focus on urgent or unforeseen supervisory issues could 

22 Strategy on supervisory data in EU financial services | European Commission (europa.eu). 
23 https://ec.europa.eu/info/publications/211027-banking-package_en 
24 New Article 32a in MIFIR proposal of 25-11-2021 (COM/2021/727 final) on stand-alone suspension of the 
trading obligation 

6 

 
 
 
 
 
 
 
 
 
 
                                                                                                                                                                     
contribute to a more efficient use of peer reviews given that peer reviews require a lot 
of resources.  

-  Each of the ESAs has developed its own informal supervisory convergence tools in a 
different way to the other ESAs. This is due to the different regulatory frameworks in 
which  the  ESAs  operate.  The  Commission  agrees  with  stakeholders  that  these  tools 
have  proven  very  effective,  and  invites  the  ESAs  to  continue  using  these  informal 
instruments.  However,  the  ESAs  could  also  explore  to  what  extent  informal  tools 
developed by other ESAs might  be usefully incorporated into their own supervisory 
convergence toolbox. 

-  Discussion  of  supervisory  cases  among  National  Competent  Authorities  in  a  more 
systematic  way  could  be  useful  to  promote  convergent  supervisory  outcomes  in 
comparable situations. The Commission invites the ESAs to draw up criteria on how 
to select supervisory cases relevant for such exchanges. The ESAs could enhance the 
value  of  these  discussions  by  creating  a  collection  of  such  cases  available  for 
consultation by National Competent Authorities. 

3.  GOVERNANCE,  JOINT  BODIES,  STAKEHOLDERS’  INVOLVEMENT  AND 

SUPERVISORY INDEPENDENCE 

Background and findings 

a)  Governance of the ESAs 

In the last ESA review, the Commission proposed far-reaching changes to the governance of 
the ESAs, aiming for them to be more independent from National Competent Authorities for 
certain tasks. The main argument for those proposals was that the use of some of the ESAs’ 
tools  could  be  increased  by  putting  certain  decisions  into  the  hands  of  a  body  that  had  a 
degree of independence from the authorities to which those tools applied. This approach was 
subject  to  intense discussions in  the legislative process. The text  finally  adopted by  the  co-
this, 
legislators  fell  short  of 
improvements were introduced in targeted areas  (i.e. on breach of Union law25, conflicts of 
interest, and the role of chairpersons).  

initial  ambition.  Notwithstanding 

the  Commission’s 

In the consultation, the vast majority of public authorities stressed that the ESAs are member-
driven organisations, in which decisions are taken by national representatives in the Board of 
Supervisors  as  the  ultimate  decision-making  body.  Most  industry  respondents  believed  that 
the  ESAs’  current  governance  arrangements  enabled  the  ESAs  to  ensure  objectivity, 
independence  and  efficiency  in  their  work/decision-making.  However,  a  number  of 
stakeholders (a few public authorities, some industry representatives, academics and NGOs) 
supported  governance  arrangements  that  are  more  independent  from  national  supervisors. 
These  stakeholders  considered  the  limited  amendments  by  the  2019  ESA  review  as 
insufficient  to  overcome  situations  where  decisions  are  taken  by  representatives  of  the 

25  Governance,  in  the  context  of  the  breach-of-Union  law  process,  was  strengthened  by:  (i)  introducing 
independent panels; (ii) taking decisions through written non-objection procedures; and (iii) removing the voting 
right of the member who allegedly breached Union law. 

7 

 
 
 
 
 
 
 
 
                                                      
National  Competent  Authorities,  who  might  be  driven  more  by  national  than  by  European 
interests. 

Stakeholders  were  of  the  opinion  that  the  latest  changes  in  governance  had  improved  the 
ESAs’  decision-making  processes26.  Some  respondents  observed  that  the  changes  brought 
about by the 2019 ESA review: (i) made decision-making quicker; (ii) mitigated the risk of 
conflicts of interest; and (iii) brought additional impartiality and transparency.  

On voting arrangements, there continue to be differing opinions. This is clearly illustrated by 
a public-sector voice from a smaller Member State asking for more decisions to be taken on 
the  basis  of  ‘one  voting  member,  one  vote’,  while  another  public-sector  respondent  from  a 
Member State with a large financial market suggested strengthening the influence of Member 
States most affected by individual decisions of the ESA. A few respondents suggested further 
extending  the  right  of  an  ESA  chairperson  to  vote  in  all  kinds  of  decisions  (currently,  the 
chairperson cannot vote in decisions taken by qualified majority).  

Opinions  were  also  split  on  whether  the  double-majority  requirement  for  votes  in  the  EBA 
(requiring  simple  majorities  from  National  Competent  Authorities  participating  and  not 
participating in the Banking Union) should be kept unchanged. On the one hand, respondents 
considered that  the double-majority  requirement  resulted in  an unjustified overweighting of 
Member States not participating in the Single Supervisory Mechanism which would increase 
further with additional Member States joining the Banking Union. On the other hand, public 
authorities (and not only those from Member States not participating in the Banking Union): 
(i)  stressed  the  importance  of  the  double-majority  requirement  for  European  cohesion;  and 
(ii)  considered  this  requirement  to  be  a  guarantee  of  balanced  and  proportionate 
representation of Member States both within and outside the Banking Union.  

Some respondents also reminded about the need for a targeted change to  the governance of 
the  EBA  in  order  to  ensure  a  more  consistent  separation  of  its  resolution  and  prudential 
functions. 

Several  respondents  also  requested  changes  to  governance  at  ESMA  in  cases  of  direct 
supervision. These respondents suggested that instead of submitting all issues to the Board of 
Supervisors for decisions, ESMA should: (i) entrust an independent Management Board or a 
committee  similar  to  the  Central  Counterparty  (CCP)  Supervisory  Committee  with  these 
decisions; or (ii) make more use of the delegation powers to relieve the Board of Supervisors 
of day-to-day supervisory decisions. 

In addition to the consultation feedback, it can be useful to draw on other sources to assess 
the governance of the ESAs. One such source is the special report27 by the European Court of 
Auditors  (ECA)  on  the  EU’s  efforts  to  fight  money  laundering.  In  this  report,  the  ECA 
considered  that,  despite  the  revised  EBA  Regulation  providing  for  some  changes  to  the 
breach-of-Union  law  procedure,  there  remained  key  governance  shortcomings  in  the  EBA. 
Likewise,  in  its  recent  special  report  on  investment  funds,  the  ECA  considers  that  ESMA 

26 The allegations of a potential breach of Union law by the Danish Financial Services Authority in the context 
of the Danske Bank money-laundering case (the last case of an alleged breach of Union law) took place before 
the latest changes started to apply. It is not possible to conclude whether the outcome would have been different 
under the revised rules. 
27 See footnote 16 for references to both ECA reports. 

8 

 
 
 
 
 
 
 
 
                                                      
faces  challenges  in  using  its  tools  effectively.  These  challenges  include  ESMA’s  own 
governance  structure  and  its  dependence  on  the  cooperation  of  National  Competent 
Authorities.  

b)  Joint bodies 

All respondents saw the two joint bodies of the ESAs (namely the Board of Appeal and the 
Joint  Committee)  as  effective  mechanisms  in  general  to  ensure  consistent  views  and  cross-
sectoral cooperation. However, some stakeholders observed that the  Joint Committee  is  not 
used to the  full extent  possible  in  cases where the ESAs have  a common mandate  (e.g.  the 
new  ESA  mandate  to  foster  supervisory  independence).  A  few  respondents  said  that  the 
decision-making  of  the  Joint  Committee  was  too  cumbersome  since  decisions  taken  by  the 
Joint Committee need to be endorsed by the boards of the three ESAs. 

c)  Stakeholder involvement 

Stakeholders were also consulted on their involvement with the ESAs and on how the ESAs 
had been performing in ensuring stakeholder involvement. Most public authorities and a few 
industry respondents considered that the current framework works well and that stakeholders 
are sufficiently consulted. Most industry respondents stressed that the ESAs should intensify 
their  interaction  and  dialogue  with  the  industry  and  adopt  a  more  open  and  pragmatic 
approach28.  Finally,  various  industry  representatives  raised  the  issue  of  deadlines  being  too 
short to provide feedback when ESAs carry out consultations.  

d)  Supervisory independence 

The 2019 ESA review introduced a new responsibility for the ESAs: to foster and monitor the 
independence of national supervisors. The ESAs have recently published their first individual 
reports on the supervisory independence of competent authorities in their sectors29.  

In  the  consultation,  most  respondents  were  positive  about  this  new  responsibility  for  the 
ESAs  to  foster  supervisory  independence.  Public  authorities  observed  that  this  new 
responsibility makes possible an expert assessment by an entity that is knowledgeable about 
the  functions  carried  out  by  National  Competent  Authorities.  These  public  authorities  also 
said that: (i) independence was a pre-condition for developing effective supervision; (ii) the 
new responsibility could improve harmonisation in the area of supervisory independence; and 
(iii)  the  ESAs  could  provide  useful  insights  when  comparing  the  state  of  supervisory 
independence across Europe.  

Some  respondents  from  the  finance  industry  argued  that  the  independence  of  national 
supervisors is critical for ensuring the legitimacy and credibility of the supervisory process. A 
research  institute  observed  that  the  independence  of  national  supervisory  authorities  should 
be  regulated  uniformly  across  Europe  by  introducing  amendments  to  relevant  financial 
legislation.  

Assessment of the Commission  

28 For example, stakeholders observed that: (i) more meetings and direct dialogues with firms and not only with 
associations  could  be  organised;  (ii)  consultations  are  sometimes  too  narrow  and  technical;  and  (iii)  feedback 
could be provided on how stakeholders views were taken into account. 
29 ESMA report; EBA report; EIOPA report. 

9 

 
 
 
 
 
 
 
 
                                                      
The Commission agrees that the amendments set out in the 2019 ESA review are a step in the 
right direction and should have a positive overall impact on the governance of the ESAs. But 
despite these changes, the Commission continues to believe that the governance system of the 
ESAs,  with  decisions  being  taken  by  the  27  national  supervisors,  may  still  give  too  much 
prominence  to  national  interests  and  occasionally  produce  sub-optimal  results.  In  addition, 
this  governance  system  sometimes  makes  it  difficult  for  the  ESAs  to  use  the  convergence 
tools  at  their  disposal  in  the  most  appropriate  way.  This  view  is  corroborated  by  the 
conclusions  of  the  ECA  and  supported  by  responses  in  the  consultation,  particularly  from 
academia,  consumer  groups,  and  a  limited  number  of  industry  stakeholders  and  public 
authorities.  That  said,  the Commission  considers  that not  enough time has passed since the 
latest  changes  began  to  apply  in  practice  to  determine  whether  further  amendments  are 
warranted.  The  consultation  feedback  has  clearly  shown  that  stakeholders  do  not  overall 
currently  support  further  legislative  changes.  Therefore,  the  Commission  will  refrain  from 
proposing  further  changes  at  this  juncture.  Nevertheless,  the  Commission  will  monitor 
closely this key area and consider further measures.  

Based on suggestions from the consultation, the Commission will also consider the need for a 
targeted change to governance of the EBA in order to ensure a more consistent separation of 
its  resolution  and  prudential  functions.  Furthermore,  the  Commission  will  consider 
introducing standards for independence in future reviews of sector legislation.  In this spirit, 
the  Commission  has  already  proposed  operational  provisions  on 
the  principle  of 
independence of competent authorities in the banking package adopted in October 202130. 

Additionally,  some  improvements  suggested  by  stakeholders  in  the  consultation  can  be 
implemented rather quickly by the ESAs. The Commission invites the ESAs to reflect on the 
following suggestions. 

-  The ESAs should improve transparency on the timing and content of decisions by the 
Board of Supervisors by publishing the part of their agendas which concern regulatory 
items. For regulatory matters, a tentative planning calendar could be published every 
6 months, so that stakeholders can anticipate consultations. 

-  Where this  is  not  already  the case, the ESAs could  further  increase their interaction 
with  stakeholders  by  engaging  more  in  an  ongoing  dialogue  with  stakeholders, 
beyond what already happens with the stakeholder groups.  

- 

In  the  interest  of  greater  efficiency,  ESMA  is  invited  to  consider  whether  there  are 
further possibilities to  delegate day-to  day supervisory decisions for entities  that are 
under its direct supervision to committees, or to the chairperson.  

30  https://ec.europa.eu/info/publications/211027-banking-package_en;  Article  4  of  the  Capital  Requirements 
Directive  would  be  amended  to  clarify  how  Member  States  must  ensure  that  the  independence  of  competent 
authorities,  including  their  staff  and  governance  bodies,  is  preserved.  Minimum  requirements  would  be 
introduced  to  prevent  conflicts  of  interest  in  the  supervisory  tasks  of  competent  authorities,  their  staff  and 
governance bodies. The EBA would also be mandated to develop guidelines in that regard, taking into account 
international  best  practices.  These  measures  respond  to  problems  that  emerged  in  the  Wirecard  case  in 
particular. 

10 

 
 
 
 
 
 
 
 
                                                      
-  There  is  an  increasing  number  of  cross-sectoral  tasks  and  topics  that  must  be  dealt 
with  by  the  ESAs.  This  has  made  the  Joint  Committee  increasingly  relevant.  Given 
these developments, the ESAs are invited to reflect on desirable changes that could be 
made  to  the  framework  in  the  future  to  ensure  sufficient  resources  and  improve  the 
decision-making process. The Commission invites the ESAs to provide this advice to 
the Commission by the end of 2023. 

-  The  ESAs  are  encouraged  to  make  further  progress  in  their  new  task  of  monitoring 
and  fostering  supervisory  independence  by  further  developing  the  principles  of 
independence  (i.e.  operational,  financial  and  personal  independence  as  well  as 
accountability  and 
transparency)  and  drawing  up  cross-sectoral  criteria  for 
supervisory independence in the EU. The ESAs could then assess the extent to which 
the criteria are met, thus going beyond the self-assessments of competent authorities 
that have been carried out so far. 

4.  DIRECT SUPERVISION  

Background and findings 

The 2019 ESA review entrusted ESMA with  direct  supervisory responsibilities in the areas 
of:  (i)  critical  EU  benchmarks  and  non-EU  benchmark  administrators;  and  (ii)  providers  of 
data-reporting  services.  These  extended  direct  supervisory  powers  apply  as  of 
1 January 2022. Since January 2020, ESMA has also been given a new range of supervisory 
responsibilities under the EMIR 2.231 framework with respect to non-EU CCPs.  

In  October  2020,  the  European  Parliament  called  on  the  Commission  to  consider  gradually 
granting  ESMA  more  direct  supervisory  powers,  including  direct  oversight  over  certain 
market  segments,  such  as:  (i)  EU  CCPs;  (ii)  central  securities  depositories;  and  (iii)  the 
European Single Access Point32. 

In  the  consultation,  most  respondents  gave  fairly  positive  assessments  of  ESMA’s 
supervisory powers and ESMA’s performance in supervising credit-rating agencies and trade 
repositories.  However,  respondents  also  pointed  out  that  there  was  some  room  for 
improvement,  mainly  in  communication  and  transparency.  For  example,  the  respondents 
suggested  there  was  a  need  for:  (i)  closer  interaction  between  ESMA,  National  Competent 
Authorities  and  trade  repositories;  and  (ii)  more  regular  bilateral  meetings  between  the 
supervisor and the supervised entity.  

On the future scope of direct supervisory powers, most respondents did not see the need for 
further  centralisation  of  supervision  powers  in  the  ESAs,  at  least  not  at  present.  These 

31  Regulation  (EU)  2019/2099  of  the  European  Parliament  and  of  the  Council  of  23  October  2019  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. 
32 European Parliament resolution of 8 October 2020 on further development of the CMU: improving access to 
capital  market  finance, 
investor  participation 
(https://www.europarl.europa.eu/doceo/document/TA-9-2020-0266_EN.html). 

in  particular  by  SMEs,  and  further  enabling  retail 

11 

 
 
 
 
 
 
 
 
 
 
                                                      
respondents  argued  that: (i) most  capital-market  operators should continue to  be  supervised 
by National Competent Authorities given their greater proximity and local knowledge; (ii) the 
ESAs  have  been  set  up  as  member-driven  organisations  with  the  objective  of  improving 
supervisory  convergence  among  National  Competent  Authorities;  and  (iii)  the  principles  of 
subsidiarity  and  proportionality  mean  it  is  not  necessary  to  centralise  powers  further. 
Nevertheless, other respondents from both public authorities and industry thought that direct 
supervision  should  be  considered  in  specific  areas  of  capital  markets  where  it  would  add 
value. These areas where direct supervision should be considered are, namely: 

- 

environmental, social and governance (ESG) rating agencies, ESG data providers, and 
sustainability-related service providers; 

-  pan-European market infrastructures such as EU CCPs.  

A number of public authorities were of the view that the decision to confer direct-supervision 
powers to the ESAs should be based on evidence and a set of clear criteria.  

Assessment of the Commission 

In  line  with  the  action  plan  on  Capital  Markets  Union,  the  Commission  will  consider 
proposing  direct  supervision  by  the  ESAs  should  there  be  indications  that  the  current 
supervisory  set-up  is  not  appropriate  for  the  desired  level  of  market  integration.  The 
Commission will assess this matter carefully when reviewing the relevant sectoral legislation.  

In this spirit, the Commission has already included in three recent legislative proposals that 
are under negotiation (MICA33, DORA34 and the proposal on EU green bonds35) mandates for 
direct supervision for the EBA and ESMA and oversight responsibilities for the three ESAs. 

The  Commission36  is  also  looking  at  ways  to  address  the  financial-stability  risk  posed  by 
overreliance on UK-based CCPs. It intends to come forward this year with measures to make 
EU-based  CCPs  more  attractive,  including  by  reviewing  the  EU  supervisory  system  for 
CCPs. In this context, the Commission recently ran a targeted consultation on the review of 
the central clearing framework in the EU37. 

Additionally, the Commission will consider the possibility of setting out different ‘modes’ of 

of 

593 

final 

(COM 

(2020) 

proposal 

24.9.2020) 

33 Supervision of significant asset-referenced tokens and significant e-money tokens by the EBA is included in 
the  Commission’s  MiCA 
(https://eur-
lex.europa.eu/resource.html?uri=cellar:f69f89bb-fe54-11ea-b44f-
01aa75ed71a1.0001.02/DOC_1&format=PDF). 
34 Oversight of critical ICT third-party services provided by the ESAs is included in the Commission’s DORA 
proposal 
(https://eur-lex.europa.eu/legal-
of 
(COM(2020) 
content/EN/ALL/?uri=COM:2020:595:FIN).  
35 Supervision of external verifiers of EU green bonds by ESMA is included in the Commission’s proposal on 
(https://eur-lex.europa.eu/legal-
final 
European  Green  Bonds 
content/EN/TXT/?uri=CELEX:52021PC0391). 
36  Commissioner  McGuinness 
(https://ec.europa.eu/commission/presscorner/detail/en/STATEMENT_21_5905). 
37  Targeted 
in 
clearing 
review  of 
(https://ec.europa.eu/info/business-economy-euro/banking-and-finance/regulatory-process-financial-
services/consultations-banking-and-finance/targeted-consultation-review-central-clearing-framework-eu_en). 

consultation  on 

proposed  way 

(COM(2021) 

24.9.2020) 

framework 

announces 

6.7.2021) 

the  EU 

clearing 

forward 

central 

central 

final 

595 

391 

the 

the 

for 

of 

12 

 
 
 
 
 
 
 
 
 
 
                                                      
direct supervision as a potential way forward in the area of direct supervision. One such mode 
could  be  the  ‘hub-and-spoke’  model,  in  which  National  Competent  Authorities  continue  to 
play a significant role and use their knowledge of national specificities of markets and legal 
systems to benefit a central supervisory authority. This is already the case in the model used 
by  the  Single  Supervisory  Mechanism  or  in  the  proposal  for  a  Regulation  establishing  the 
Authority for Anti-Money Laundering and Countering the Financing of Terrorism38. 

5.  THE SINGLE RULEBOOK AND THE OPERATION OF THE ESAs 

Background and findings 

An ‘enhanced single rulebook’  refers to  more  comprehensive and,  where appropriate,  more 
granular rules at different levels of EU legislation and guidance. On essential elements, this 
implies  more  EU  rules  set  out  in  Level  1,  namely  Regulations  and  Directives.  On  non-
essential  elements,  this  implies  more  EU  rules  set  out  in  delegated  or  implementing  acts  at 
Level 2. Further guidance and clarifications can then also be provided in guidelines or Q&As 
issued by the ESAs at Level 3. In addition, instead of directives, more harmonisation can be 
obtained through directly applicable Regulations at Level 1 for future sectoral legislation, or 
for existing legislation that comes up for review. Regulations might be a better choice than 
directives in this case, because directives generally leave Member States the choice of how to 
transpose the directive into national law. More harmonisation could also be applied through 
different  degrees  of  harmonisation  of  either  regulations  or  directives;  or  by  allowing  for 
fewer opt-outs from harmonised rules.  

The trade-off between Level 1 and Level 2 is also linked to the broader question of how to 
achieve speed, adaptability and quality in legislation, which is particularly relevant for sectors 
undergoing fast transformation. 

a)  Enhancing harmonisation in legislative acts  

The  consultation  did  not  reveal  strong  stakeholder  support  for  future  further-reaching 
harmonisation  in  Level  1  sectoral  legislation,  notwithstanding  some  support  for  greater 
harmonisation in rules on the cross-border provision of services.  

b)  Facilitating the application of harmonised law through delegated or implementing acts 

In  recent  years,  there  have  been  instances  in  financial-services  legislation  where  market 
participants and supervisors were required to start applying legislative acts at a moment when 
some  of  the  relevant  delegated  and  implementing  acts39,  including  regulatory  technical 
standards or implementing technical standards, had still not been adopted. Many stakeholders 
have pointed out that this might be a major concern in certain cases. 

Assessment of the Commission 

a)  Enhancing harmonisation in legislative acts  

38 See footnote 4.  
39 For example, in the case of Taxonomy Regulation, the Commission issued a public statement explaining that 
compliance with certain disclosure obligations would be impossible as long as the relevant delegated act (in the 
example, relating to the technical screening criteria) was missing. 

13 

 
 
 
 
 
 
 
 
 
 
                                                      
Stakeholders did not express support for greater harmonisation in the form of more EU rules 
or more granular EU rules at Level 1 or Level 2. The Commission therefore does not intend 
to  review  existing  EU  financial-services  legislation  solely  with  a  view  to  introducing  more 
granular rules  at  Level  1, or to  removing provisions allowing national  discretion. However, 
when  reviewing  or  proposing  legislation,  the  Commission  will  assess  the  impact  of 
potentially introducing more granular rules and of limiting the degree of national discretion in 
the Level 1 sectoral legislation. For directives, this will also include assessing the impact of 
an option of converting a directive into a regulation. 

Regarding the need to ensure that EU legislation remains future proof and can easily adapt to 
accelerating  technological  and  market  developments,  it  is  important  for  the  co-legislators, 
wherever  possible  and  appropriate,  to  lay  down  general  principles  in  level  1  and  more 
detailed  rules  in  level  2.  This  would  allow  to  react  more  expeditiously  to  rapid  market 
developments. 

b)  Easing the application of harmonised law through delegated or implementing acts 

Level  1  legislative  acts  contain  all  essential  elements  of  the  legislation  governing  a  certain 
area  or  sector,  since  only  non-essential  elements  can  be  delegated  to  administrative 
rulemaking by the Commission. It is therefore, in principle, feasible to apply any legislative 
act  even  in  the  absence  of  the  relevant  Level  2  acts.  However,  mere  compliance  with  the 
principles laid down in the legislative act does not necessarily produce all the results which 
the  legislation  was  conceived  to  achieve.  This  is  especially  the  case  with  reporting 
requirements  where,  in  the  absence  of  implementing  acts  providing  templates,  free-format 
reporting jeopardises coherence and comparability. In these situations, free-format reporting 
may also complicate the interpretation of the data by the supervisors and investors before the 
pertaining implementing acts are available.  

This issue is a result of tension between the following two phenomena.  

The first phenomenon is that Level 2 acts, by their very nature, take time to draw up. In some 
cases, it takes the ESAs considerable time to produce, for example, draft regulatory technical 
standards  and  implementing  technical  standards,  given  their  complex  and  technical  nature. 
The ESAs also consult stakeholders extensively and go through internal adoption processes. 
After that, the ESAs and the Commission have technical exchanges that may also take time 
before  the  adoption  procedure  is  actually  started.  Finally,  following  the  adoption  by  the 
Commission,  certain  Level  2  acts,  such  as  Commission  delegated  acts  and  regulatory 
technical standards, are subject to scrutiny by the co-legislators that may last several months. 
However, the Commission cannot speed up the process by asking the ESAs to start working 
on  Level  2  acts  before  the  Level  1  legislation  has  been  adopted,  since  the  relevant 
empowerments are not yet finished at that point.  

The  second  phenomenon  is  that,  once  the  co-legislators  reach  agreement  on  the  framework 
principles, they may be inclined to provide for a short entry into application of the Level 1 
act. They do this in order to quickly deliver on the intended policy outcome, but this makes it 
very difficult to finalise the Level 2 acts by the same date. 

The  Commission  and  the  ESAs  are  already  mitigating  the  burden  on  market  participants 
through  a  high  degree  of  transparency  when  they  draw  up  technical  advice  and  technical 
standards.  This  transparency  enables  market  participants  to  start  their  preparations  on  the 

14 

 
 
 
 
 
 
 
 
basis  of  drafts.  Nevertheless,  drafts  have  no  legal  value  and  it  is  possible  for  technical 
standards (or other Level 2 acts) to then be modified by the Commission, following demands 
by  the  co-legislators  in  the  scrutiny  process.  When  these  modifications  are  of  a  material 
nature,  the  Commission  is  required  to  send  draft  technical  standards  back  to  the  ESAs  for 
further  drafting.  Therefore,  there  are  limits  to  how  much  insight  the  stakeholders  can  draw 
from  earlier published drafts of technical  standards, where  even small  changes may require 
stakeholders to adapt. 

The Commission acknowledges that certain provisions in legislative acts can be challenging 
to apply before delegated or implementing acts have been promulgated. It will work towards 
raising  awareness  of  this  problem,  both  with  the  co-legislators  and  with  the  ESAs.  The 
Commission  recalls  that  some  of  these  difficulties  had  to  be  addressed  in  the  past  through 
changes  to  the  main  legislative  acts  in  question  to  delay  application.  Furthermore,  the 
Commission will continue to seek, where appropriate, informal prior guidance from the ESAs 
on the likely timing of planned Level 2 acts, with a view to feeding this information into the 
legislative process where beneficial.  

6.  FINANCING 

Background and findings 

The  ESAs’  budgets  are  based  on  a  60%  contribution  from  the  National  Competent 
Authorities  and  a  40%  contribution  from  the  EU  budget.  For  ESMA,  this  distribution  is 
slightly different, as entities that are directly supervised by ESMA also pay supervisory fees 
to  this  agency.  The  Commission  proposals  in  the  2019  ESA  review  to  change  the  funding 
system were not supported by the co-legislators, and the funding rules remained unchanged.  

In  the  consultation,  the  vast  majority  of  respondents  considered  that  the  provisions  on 
financing are appropriate and enable the ESAs to obtain sufficient resources to perform their 
tasks.  Public  authorities  argued  that  the  current  40/60  split  in  funding  contributions  is 
appropriate.  They  said  that  because  the  ESAs’  work  relates  to  a  greater  extent  to  a  public 
function, it was fair and proper for funding to be mainly based on public contributions. Some 
public authorities, mainly from small countries, were of the view that the portion of financing 
from the EU budget could be increased.  

Respondents from the finance industry observed that the current funding model is adequate 
since: (i) tasks of a regulatory nature should be funded by the EU budget; and (ii) supervisory 
convergence  tasks  should  be  funded  by  the  National  Competent  Authorities  since  they 
directly benefit from the convergence work and supervision is the primary responsibility of 
the  State.  Finance-industry  respondents  further  argued  that  the  current  funding  model 
empowers the European Parliament to exercise budgetary control over the ESAs for the part 
of their budget financed from the general EU budget, and thus ensures that the ESAs can be 
held accountable.  

Despite the overall positive assessment, some issues have been identified in the fees charged 
to supervised entities to cover the costs of ESMA’s direct-supervision mandates. One public 
authority argued that an increase in the financing of direct supervisory mandates should come 
from the EU rather than from an increase in fees from supervised entities. In the consultation, 

15 

 
 
 
 
 
 
 
 
 
ESMA raised40 the issue of the lack of flexibility  in the fee system, which prevents it from 
reallocating resources on the basis of identified risks. In addition, for some direct supervisory 
tasks, the number of supervised entities is small or is likely to be small41. This may result in a 
high  level  of  fees  for  small  entities,  since  sector  legislation  requires  that  the  fees  cover  all 
costs incurred for supervisory activities relating to those entities. 

Assessment of the Commission 

In  line  with  the  feedback  received,  the  Commission  does  not  intend  to  propose  legislative 
amendments to change the current legal framework for the funding of the ESAs. 

To address the issue of supervisory fees and to ensure that fees remain reasonable in relation 
to  the supervised entities’ revenues, the Commission  invites ESMA to  explore the different 
options  available  within  the  current  legal  framework.  Targeted  amendments  in  sector 
legislation  might  be  considered,  if  all  possible  non-legislative  measures  to  tackle  the  issue 
prove insufficient. 

7.  CONSUMER PROTECTION  

Background and findings 

Enhancing customer and consumer protection is an important part of the ESAs’ mandate. The 
2019  ESA  review  increased  the  ESAs’  tasks  and  improved  their  tools  in  this  area.  For 
example, the review entrusted ESMA with: (i) the coordination of mystery shopping; (ii) the 
development  of  retail  risk  indicators;  (iii)  collection,  analysis  and  reporting  on  consumer 
trends;  and  (iv)  the  extension  of  inquiries  under  Article  22(4)  of  the  ESA  Regulations  to 
potential threats to the protection of consumers or investors.  

In  the  public  consultation,  most  stakeholders  considered  that  the  ESAs  made  a  positive 
contribution  to  safeguarding  consumer  and  investor  protection.  Some  stakeholders  have 
outlined  that  consumer  issues  are  often  local.  This  means  that  good  collaboration  between 
National  Competent  Authorities  and  the  ESAs  is  of  key  importance.  In  the  view  of  most 
respondents, the ESAs provide added value by identifying consumer issues across the EU and 
sharing good practices among National Competent Authorities. In addition, most respondents 
pointed out that the ESAs play an important coordinating role within the internal market for 
the cross-border provision of services. In this regard, some public authorities requested more 
effective coordination powers for supervising cross-border services to reduce the risk of harm 
to consumers. 

Assessment of the Commission 

The Commission considers that there is currently no case for legislative changes to the ESAs’ 
founding  regulations  in  the  area  of  consumer  protection.  However,  the  Commission  will 
carefully  consider  the  current  legal  framework  in  the  course  of  the  ongoing  reviews  of 
sectoral legislation and suggest appropriate amendments to overcome identified shortcomings 
in  consumer  protection.  In  this  spirit,  the  amendment  on  collaboration  platforms  in  the 

40 https://www.esma.europa.eu/press-news/esma-news/esma-responds-european-commission-consultation-esas 
41  Such  as  the  supervision  of  providers  of  data-reporting  services,  securitisation  repositories,  and  certain 
benchmark providers. 

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Solvency  II  review42, proposed on 22 September 2021, would:  (i) enable EIOPA to  play an 
enhanced  role  in  dealing  with  prudential  aspects  in  complex  cross-border  cases;  and  (ii) 
increase EIOPA’s powers to reduce the risks to consumer protection when insurance products 
are  offered  across  borders.  The  upcoming  retail  investment  strategy43  will  be  another 
opportunity for further legislative improvements in the interest of consumer protection. 

The  ESAs  are  also  invited  to  continue  to  use  all  available  tools  to  achieve  their  consumer- 
and  investor-protection  objectives.  These  tools  include  reports  on  consumer  trends, 
supervisory  heat-maps,  peer  reviews,  and  warnings/analyses  of  own-risk  and  solvency 
assessment reports in the insurance and pension sector. 

8.  SYSTEMIC RISK  

Background and findings 

In response to the global financial crisis, the ESAs, together with the European Systemic Risk 
Board (ESRB) were mandated to contribute to macro-prudential oversight of the EU financial 
system and to prevent and mitigate systemic risk, as the co-legislator considered it important 
that  supervisory  arrangements  in  the  EU  did  not  focus  only  on  individual  firms  but  also 
ensured the stability of the financial system as a whole.  

Most  respondents  in  the  public  consultation  said  that  the  current  architecture  of  financial 
supervision  by  the  ESAs  and  the  ESRB  had  improved  the  cooperation  and  coordination  of 
systemic-risk  functions  among  competent  authorities.  In  particular,  stakeholders  identified 
the collaboration between  the ESAs and  the ESRB on stress  testing as  an example of  good 
practice. While the overall stress-test process is well coordinated by the ESAs, a number of 
respondents asked for the process to be further streamlined. They made this request because 
the  level  of  detail  in  stress-test  reporting  is  demanding  for  National  Competent  Authorities 
and  supervised  entities  due  to  the  quality-assurance  process.  Therefore,  some  stakeholders 
suggested a more  risk-based approach to  the quality  assurance of stress  tests.  In addition,  a 
few  industry  stakeholders  also  raised  concerns  about  the  publication  of  stress-test  results, 
which entail some risks of market disruption if the wider public does not fully perceive all the 
nuances of the outcome of the exercise. 

Assessment of the Commission 

The Commission sees no current need for legislative amendments in this area, but invites the 
ESAs  and  the  ESRB  to  further  streamline  the  stress-testing  process.  The  Commission  also 
notes  the  added  value  of  ensuring  a  high  degree  of  transparency  on  the  stress-test  results, 
including the publication of individual results in the insurance sector.  

Furthermore,  the  ESAs,  the  ESRB,  and  competent  authorities  are  all  encouraged  to:  (i) 
continue to strengthen their cooperation on issues relating to systemic risk across all parts of 
the  financial  sector;  and  (ii)  strengthen  their  efforts  to  develop  common  systemic-risk 
indicators, taking into account the interactions between the sectors they supervise. 

42 See footnote 18. 
43  In  its  new  capital  markets  union  action  plan  of  September  2020,  the  European  Commission  announced  its 
intention to publish a strategy for retail investments in Europe in the first half of 2022. 

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9.  CONCLUSION 

Since the last ESA review in 2019, the ESAs have continued to perform their tasks efficiently 
and effectively, including during the recent challenging circumstances caused by the COVID-
19  pandemic.  The  ESAs’  actions  during  the  COVID-19  pandemic  showed  their  ability  to 
coordinate the action of national authorities in an efficient way. The Commission takes this as 
a  clear  indication  that  the  overall  architecture  of  the  European  System  of  Financial 
Supervision – with its key role for the three ESAs – is largely adequate and works well. 

The amendments introduced in the 2019 ESA review have started to produce some noticeable 
effects.  For  example,  the  new  peer-review  process  has  proven  to  be  a  quick  and  efficient 
convergence tool, as witnessed by its first use in the Wirecard case.  

The feedback received from stakeholders on the changes introduced by the last ESA review 
in  2019  is  positive  overall.  However,  respondents  to  the  consultation  pointed  to  some 
remaining issues, in particular around the governance of the ESAs. The Commission remains 
mindful  of  the  fact  that  the  governance  arrangements  of  the  ESAs  –  with  decisions  being 
taken by 27 national supervisors – are not always conducive to ensuring that the convergence 
tools and other instruments at the disposal of the ESAs are used in the most effective way.  

Since the changes to the ESA Regulations became applicable only in 202044, the Commission 
considers  that  more  time  is  needed  to  assess  the  full  impact  of  the  latest  review  before 
considering any new amendments to the ESA Regulations. Therefore, the Commission deems 
it  premature  to  propose  legislative  changes  to  the  ESA  Regulations  at  this  juncture. 
Nevertheless, where the Commission identifies a need for changes in supervision in response 
to  new  developments  or  shortcomings,  the  Commission  may  suggest  targeted  changes  in 
sector legislation to improve supervisory convergence and supervision.  

In addition, the review revealed some areas where improvements could be implemented with 
no need for legislative changes. As outlined in this report, the Commission will work together 
with the ESAs to assess whether and in which areas non-legislative measures are warranted. 
The aim of these non-legislative measures would be to promote supervisory convergence and 
consistent supervision, which is a key building block in creating a genuine Capital Markets 
Union.  The  Commission  looks  forward  to  continuing  its  engagement  with  the  European 
Parliament,  the  Member  States  and  all  stakeholders  in  this  matter  and  will  work  with  the 
ESAs along the lines set out in this report. 

44 Direct-supervision mandates for ESMA started to apply on 1 January 2022. 

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