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Symposium 2009

Implementation - New control mechanism in EU financial markets

The Challenge

Many observers blame excessive risk taking and inadequate regulation as the core causes of the current global financial crisis that we have been witnessing.

Many observers blame excessive risk taking and inadequate regulation as the core causes of the current global financial crisis that we have been witnessing.

In September 2009 the Commission brought forward proposals to replace the EU’s existing supervisory architecture with a European system of financial supervisors (ESFS), consisting of three European Supervisory Authorities – a European Banking Authority (EBA), a European Securities and Markets Authority (ESMA), and a European Insurance and Occupational Pensions Authority (EIOPA), with the objective to

  • help restore confidence;
  • contribute to the development of a single rulebook;
  • solve problems with cross-border firms;
  • prevent the build-up of risks that threaten the stability of the overall financial system.

 

New control mechanism in EU financial marketsOn 22 September 2010, the European Parliament—following agreement by all Member States—voted through the new supervisory framework proposed by the Commission. This was confirmed by the ECOFIN Council on 17 November 2010. Three European supervisory authorities (ESAs) and a European Systemic Risk Board (ESRB) were established as from January 2011 to replace the former supervisory committees.[1]

The European Securities and Markets Authority (ESMA) contributes to safeguarding the stability of the European Union’s financial system by ensuring the integrity, transparency, efficiency and orderly functioning of securities markets, as well as enhancing investor protection. In particular, ESMA fosters supervisory convergence both amongst securities regulators, and across financial sectors by working closely with the other European Supervisory Authorities competent in the field of banking (EBA), and insurance and occupational pensions (EIOPA).

ESMA’s work on securities legislation contributes to the development of a single rule book in Europe. This serves two purposes; firstly, it ensures the consistent treatment of investors across the Union, enabling an adequate level of protection of investors through effective regulation and supervision. Secondly, it promotes equal conditions of competition for financial service providers, as well as ensuring the effectiveness and cost efficiency of supervision for supervised companies. As part of its role in standard setting and reducing the scope of regulatory arbitrage, ESMA strengthens international supervisory cooperation. Where requested in European law, ESMA undertakes the supervision of certain entities with pan-European reach.

Finally, ESMA also contributes to the financial stability of the European Union, in the short, medium and long-term, through its contribution to the work of the European Systemic Risk Board, which identifies potential risks to the financial system and provides advice to diminish possible threats to the financial stability of the Union. ESMA is also responsible for coordinating actions of securities supervisors or adopting emergency measures when a crisis situation arises.[2]

In the Regulation of the European Parliament and of the Council of 24 November 2010 establishing the European Securities and Markets Authority, paragraph 12 declares:

“The Authority should also be able to temporarily prohibit or restrict certain financial activities that threaten the orderly functioning and integrity of financial markets or the stability of the whole or part of the financial system in the Union in the cases specified and under the conditions laid down in the legislative acts referred to in this Regulation. If required to make such temporary prohibition in the case of an emergency situation, the Authority should do so in accordance with and under the conditions laid down in this Regulation. In cases where a temporary prohibition or restriction of certain financial activities has a cross-sectoral impact, sectoral legislation should provide that the Authority should consult and coordinate its action with, where relevant, the European Supervisory Authority (European Banking Authority) and the European Supervisory Authority (European Insurance and Occupational Pensions Authority), through the Joint Committee.”[3]



[1] http://ec.europa.eu/internal_market/finances/committees/index_en.htm

[2] http://www.esma.europa.eu/page/esma-short

[3] http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:331:0084:0119:EN:PDF

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    Symposium 2009

    Consider establishing an institution with the power to approve or reject new financial products in accordance with their forecast systemic risks

    Consider establishing an institution with the power to approve or reject new financial products in accordance with their forecast systemic risks

    Consider establishing an institution with the power to approve or reject new financial products in accordance with their forecast systemic risks

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