The European system of financial supervision is proceeding in the right direction. In the future, the European Supervisory Agencies’ (ESA) direct supervision will extend to critical benchmark administrators and data reporting service providers that operate across the EU, while other businesses can continue to report to their national supervisors.
In September 2017, the European Commission put forward a proposal to reinforce the role of the ESAs, which the Council and the Parliament have now amended. Finance Finland (FFI), the Finnish Ministry of Finance, and the Finnish Financial Supervisory Authority (FIN-FSA) were very pleased with this development, which was in line with their preferences.
“Strengthening the European system of financial supervision is wise – as long as the changes are justified and no excessive financial or administrative burden is imposed on the businesses and institutions operating in the sector”, says FFI Adviser Elina Kamppi.
One of the amendments was the extension of direct EU supervision to critical benchmarks administrators and data reporting service providers. The EU area has only a handful of such operators, and since their operations span the entire single market, it is sensible to centralise their supervision under an ESA.
The Commission’s original proposal suggested that the European Securities and Markets Authority (ESMA) would also supervise individual fund managers and, for example, the outsourcing arrangements of funds. This plan was waived.
“The original proposal would have noticeably complicated the interaction of small investment service providers and their supervisors. The companies would have been required to do all their reporting to the European supervisor in Paris. Now they can continue to report to their own national supervisor in their own language. For example, Finnish companies report to the FIN-FSA”, Kamppi explains.
The Council and the Parliament also decided to maintain the current financing system of the ESAs.
The European system of financial supervision consists of the European Systemic Risk Board (ESRB) and the three European Supervisory Authorities (ESAs), namely the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA). The ESAs were introduced in 2011 with the objective of increasing public trust in market supervision and supporting economic recovery in Europe after the global financial crisis.