New financial watchdogs on duty

1 January saw the emergence of three new European financial supervisory authorities. The Euro-pean Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority will overlook the financial markets of EU member states with more coordination and more strictly than before.

As the Hungarian Presidency took office on 1 January 2011, three new European supervisory authorities started their operations. In November 2010 the Council of the European Union decided to put in place a new European financial framework system and new supervisory authorities. The reform also involved a reorganisation of macro and microprudential supervisory authorities. It was aimed to provide more stringent risk surveillance both in the system as a whole and in individual financial services. This is in line with the plan of the Hungarian Presidency, which is to promote the establishment of a framework system for crisis prevention and management, which is vital for the stable workings of financial markets and can contribute to the sharing of burdens in crisis situations.

According to the decision, a new body, the European Systemic Risk Board was set up in Frankfurt on 16 December. It is responsible for overseeing the operation of the European financial at a macro level. Managed by Jean-Claude Trichet, President of the European Central Bank, the Board will be monitoring any system-level risk and identify any situation which requires a rapid intervention. In parallel, the three new European watchdogs and the European System of Financial Supervisors (ESFS), comprising member state supervisory bodies, will provide micro level surveillance.

The European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA) will replace the previous EU committees responsible for financial market services, having had only consultative competences. The newly established organisations will have broader room for manoeuvring. For instance, they may investigate alleged breaches of EU law and, in certain circumstances, may call on national authorities to eliminate regulatory deficiencies. As a part of their coordination tasks, they may in emergency situations adopt individual decisions requiring the competent authorities to take the necessary measures.In essence, the three authorities will be responsible for safeguarding the harmonisation of national regulations, but they may also contribute to the improvement of European regulations. The aims of ESMA include, for example, the introduction of a standard European insurance statute, and EBA will be responsible for developing the European rules of banking, payment and electronic payment services.

At the same time, Michel Barnier, EU Commissioner for Internal Market and Financial Services, emphasised that the EU does not intend to replace the national authorities with European level institutions. „Our aim is to create a network of authorities, where the national authorities are responsible for the daily surveillance, and the European authorities – using the expertise of the national authorities and working hand in hand with them – are responsible for coordination, monitoring and if need be arbitration between national authorities, and will contribute to the harmonisation of technical rules applicable to financial institutions,” he said.


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