* I have benefitted from discussing my ideas for this chapter with Carlo Comporti, Carmine di Noia, and other participants at a conference in Taormina in June 2010 (organizing committee: E. Wymeersch, G. Ferrarini, K. Hopt), and especially from many discussions of the issues with Niamh Moloney. This chapter was finalized in December 2010 but it has been possible to update some references to material available at that time but only formally published during 2011.
2 E. Wymeersch, ‘The Structure of Financial Supervision in Europe: About Single, Twin Peaks and Multiple Financial Supervisors’ (2007) 8 EBOR 37.
3 The European Systemic Risk Board is not considered further in this chapter. See E. Ferran and K. Alexander, ‘Can Soft Law Bodies Be Effective? The Special Case of the European Systemic Risk Board’  ELR 751.
4 Ibid, acknowledging that the intellectually pure option of full federalization did not command political support and was not the way forward. Also Wymeersch, see n 2, at 255 (centralization ‘generally considered now as undesirable, in view of the state of integration of the markets, and in any case premature’).
5 The working paper version of this chapter (published at <http://ssrn.com/abstract=1701147>, accessed 4 February 2012) contains a table detailing institutional responsibilities in Member States as at mid-2010. This sections draws on that background material.
6 In the United Kingdom certain supervisory functions are performed by a dedicated authority for pensions regulation. As a Member of CEIOPS/EIOPA, this specialist body is listed in Table 5.1 but its limited functions mean that, in overall terms, it remains accurate (for now) to include the United Kingdom in the single regulator model category.
7 R. Beetsma and S. Eijffinger, ‘The Restructuring of Financial Supervision in the EU’ (2009) 8 European View 3. The seminal paper on the ‘twin peaks’ model is: M. Taylor, Twin Peaks: A Regulatory Structure for the New Century (London: Centre for the Study of Financial Innovation, December 1995).
8 The Autorité de Contrôle Prudentiel (ACP), which is closely linked to the Banque de France, is responsible for supervising banks and insurers. The Autorité des Marchés Financiers (AMF) is the markets supervisor. The ACP was established by Ordinance in January 2010.
9 Central Bank Reform Act 2010 (commenced (in part) 1 October 2010).
10 E. Ferran, ‘The Break-up of the Financial Services Authority’ (2011) 31 OJLS 455.
11 K.L. Engelen, ‘Germany’s Fight Over BaFin’ (Winter 2010) The International Economy 54. However, this idea may have been sidelined as a result of changes in the political balance of power after the June 2010 German elections.
14 But the post-crisis emphasis on prudential supervision has sparked a trend towards adoption of the twin peaks model, which Belgium, France, and the United Kingdom have opted for. See also High Level Group on Financial Supervision in the EU, Report (Brussels, February 2009) (de Larosière Report), 48.
15 Commission Decision 2001/527/EC establishing the Committee of European Securities Regulators  OJ L191/43; Commission Decision 2004/5/EC establishing the Committee of European Banking Supervisors  OJ L3/28; Commission Decision 2004/6/EC establishing the Committee of European Insurance and Occupational Pensions Supervisors  OJ L3/30. The founding decisions were revised in 2009: Commission Decision 2009/77/EC establishing the Committee of European Securities Regulators  OJ L25/18; Commission Decision 2009/78/EC establishing the Committee of European Banking Supervisors  OJ L25/23; Commission Decision 2009/79/EC establishing the Committee of European Insurance and Occupational Pensions Supervisors  OJ L25/28.
16 Committee of Wise Men on the Regulation of European Securities Markets, Final Report (Brussels, February 2001) (Lamfalussy Report).
17 European Commission, Review of the Lamfalussy Process—Strengthening Supervisory Convergence (COM(2007) 727).
18 Ibid, at para 1 (noting that ambitious changes, such as delegating rule-making powers, was not feasible at that time because of opposition from Member States and other stakeholders).
19 The EEA countries participated fully in meetings but not in decision-making: CESR Charter (CESR/08-375d), Art 1.
20 In order to be able to contract with third parties and facilitate its operation and administration, CESR Members set up a support structure with legal personality.
21 CESR, Annual Report 2009, Appendix 5.2.
23 CESR, Annual Report 2009, Appendix 5.1.
24 CESR Charter, Art 9.3; Decision 716/2009/EC of the European Parliament and of the Council of 16 September 2009 establishing a Community programme to support specific activities in the field of financial services, financial reporting and auditing  OJ L253/8. The EU contribution in 2009 was €158,000.
25 CESR, Annual Report 2009, 20.
26 CESR, Annual Report 2009, 98.
27 CESR Charter, Art 6; Commission Decision 2009/77/EC, Art 14. On the background to the Charter amendments and the QMV mechanism: CESR, Annual Report 2008, 3, 74–5.
28 In its original founding text, this was the only formal responsibility assigned to CESR: Commission Decision 2001/527/EC, Art 2. It remains the first task mentioned: Commission Decision 2009/77/EC, Art 2.
29 On the policy side CESR established ECONET (later renamed Committee for Economic and Market Analysis), a network of economists from CESR Members’ national authorities to enhance its capability to undertake economic analysis of key market trends and risks: CESR, Annual Report 2009, 30.
30 eg during the first half of 2010 a major focus for CESR was the review of MiFID: CESR, Half-Yearly Report 2010, 2, and 12–15.
31 CESR, Annual Report 2001–02 (its first ever annual report) lists (at 4) its work on the development of standards in a wide range of areas (including clearing and settlement; stabilization and allotment; alternative trading systems, conduct of business, counterparty and professional investor protection regimes, and financial reporting). Over the years, the range continued to expand: N. Moloney, ‘The Committee of European Securities Regulators and Level 3 of the Lamfalussy Process’ in M. Tison, H. de Wulf, C. van der Elst, and R. Steennot (eds), Perspectives in Company Law and Financial Regulation (Cambridge University Press, 2009), 449, 454. Level 3 standard-setting activity was not even mentioned in Decision 2001/527/EC (although it was a function that the Lamfalussy Report, see n 16, had envisaged). It was expressly recognized as one of CESR’s functions in the updated founding text and Charter: Commission Decision 2009/77/EC, Art 3 and CESR Charter (2008), Art 4.3.
32 By way of illustration, in most of the CESR Member countries in which short selling was regarded as a threat to the markets during the crisis the national supervisory authority had some power to intervene to curb the practice, whether by formulating additional regulatory requirements or by softer methods, such as issuing interpretative guidance in relation to existing regulations. For a summary of the measures taken by national authorities: CESR, Measures Adopted by CESR Members on Short Selling (CESR/08-742, updated thereafter). For a more general survey of CESR Members’ rule-making powers: CESR, Preliminary Progress Report: Which Supervisory Tools for the EU Securities Markets? (CESR/04-333f), 27.
33 Moloney, see n 31, provides a detailed review.
34 CESR, Amended Terms of Reference on the Organisation and Functioning of CESR-Pol (CESR/06-114 replacing CESR/02-070b).
38 The so-called TREM and IRDS systems described in CESR, Annual Report 2009, 44–5. TREM exchanged around a billion of transaction reports in 2008–09. IRDS, the Instrument Reference Data System, collects reference data for all instruments admitted to trading in Europe: CESR, Half-Yearly Report 2009, 16 (describing the implementation of the IRDS as demonstrating CESR’s ability to implement a pan-European IT system and ‘setting ground for future IT projects’).
39 CESR defined ‘implementation transparency’ as referring to its work in explaining where differences in implementing EU Directives (hard law) and CESR guidelines (soft law) were occurring and its assessments of how CESR Members had implemented derogations where Directives or Regulations allowed differences to exist: CESR, Annual Report 2009, 56.
40 Generally on the purpose of and methodology for mapping exercises: CESR/07-664.
41 CESR/07–383 (Prospectus Directive); CESR/07–380 (Market Abuse Directive); CESR/07-334b (Prospectus and Market Abuse Directives); CESR/07-693 (Market Abuse Directive); CESR/08-220 (MiFID); CESR/09-058 (Transparency Directive). Other groups did similar fact-finding work: eg, 3L3 Anti Money Laundering Task Force Compendium Paper on the Supervisory Implementation Practices across EU Member States of the Third Money Laundering Directive (CESR/09-1176); 3L3 Delegation Task Force, Delegation of Responsibilities (CESR/09-190) CESR Investment Management Sub-committee, Mapping of Duties and Liabilities of UCITS Depositaries (CESR/09-175).
42 eg CESR, MAD Options and Discretions (CESR/09-1120). See also CESR, Half-Yearly Report 2010, 28–9.
43 These included a Q&A on prospectuses; an FAQ on the Transparency Directive; a Q&A on MiFID common positions; and a Q&A on MiFID complex and non complex financial instruments.
44 CESR, Annual Report 2008, 25. The CESR MiFID database on shares admitted to trading on EU regulated markets allowed a click through to the corresponding national officially appointed mechanism (OAM) for the storage of regulated information. Development of the framework for central storage of regulated information was a continuing preoccupation for CESR: Commission Recommendation 2007/65/EC; CESR, Consultation (CESR/09-859); CESR, Annual Report 2009, 48; CESR, Development of Pan-European Access to Financial Information Disclosed by Listed Companies (CESR/10-719c).
45 Note Moloney, ‘The Committee’, see n 31, (finding that in 2007–08 CESR appeared to be stepping back from developing a distinct supervisory capacity but presciently suggesting that things might be different ‘were political conditions to change’).
46 CESR, Half-Yearly Report 2009, 11; CESR, Annual Report 2009, 52–3.
47 CESR, Half-Yearly Report 2009, 11.
48 CESR, Half-Yearly Report 2009, 9–10; CESR, Annual Report 2009, 26; CESR, Half-Yearly Report 2010, 8–11.
49 CESR, Annual Report 2008, 28.
50 CESR, Annual Report 2008, 91.
51 Generally CESR, Annual Report 2008, 31, 61–7; CESR, Annual Report 2009, 73–80.
53 CESR Charter, Art 6. CESR, The Role of CESR at ‘Level 3’ under the Lamfalussy Process: Action Plan for 2005 (CESR/04-527b), explains (at 9) that Level 3 measures ‘create obligations on national regulators vis-à-vis each other in order to respect their commitment under the CESR Charter on the one hand and to promote mutual confidence and to create “peer” pressure on the other hand’.
54 Ibid. The original CESR Charter did not make express provision for peer reviews.
55 Implementation Review of CESR’s Standard No 1 on Financial Information (CESR/06-181); Updated Self Assessment and Peer Review of CESR’s Standard No 1 on Financial Information (CESR/09-374); Peer Review of the Implementation of Standard No 2 on Financial Information (CESR/09-188); Peer Review of the Implementation of CESR’s Guidelines to Simplify the Notification Procedure of UCITS (CESR/09-1034). For an overview of these exercises, see CESR, Annual Report 2009, 59–60.
56 CESR/09-374. 52 per cent of jurisdictions were fully compliant on the basis of self-assessment but peer review took this down to 45 per cent.
58 European Commission, Review of the Lamfalussy Process, see n 17, at para 4.3.2. See also E. Wymeersch, ‘The Institutional Reforms of the European Financial Supervisory System’  European Company and Financial Law Review 240.
59 de Larosière Report. see n 14, at 56.
60 CESR, Protocol on Mediation Mechanisms (CESR/06-286b).
62 European Commission, Review of the Lamfalussy Process (see n 17), para 4.1.
63 CESR, Annual Report 2008, 35, gives the example of how mapping of the application in practice of the definition of an adequate public disclosure for stabilization activities and buy-back programmes provided input to CESR’s work on Level 3 guidance. In its mapping exercise with respect to MAD options and discretions (CESR/09-1120), the CESR Review Panel explicitly acknowledged that the ultimate target of the exercise was to draft a proposal for further harmonization of national implementing measures.
64 CESR, Half-Yearly Report 2009, 13–14.
67 de Larosière Report, see n 14, at 75.
68 CESR, Model for a Pan-European Short Selling Disclosure Regime (CESR/10-088); CESR Technical Details of the Pan-European Short Selling Disclosure Regime (CESR/10-453); CESR, Half-Yearly Report 2010, 17–18.
70 CESR, Development of Pan-European Access to Financial Information, see n 52.
71 CESR, A Proposed Evolution of EU Securities Supervision beyond 2007 (CESR/07-783) 2.
72 Decision No 716/2009/EC, recital 13 and Art 2.
75 CEBS, Annual Report 2009, 8.
77 CEBS, Annual Report 2009, Annex 5.5.
78 CEBS Charter, Art 8.3; Decision 716/2009/EC.
80 CEBS, Annual Report 2009, 7.
81 CEBS Charter, Art 5.4; CEBS, Annual Report 2009, 8.
82 CEBS was closely involved in advising the Commission on proposals to remedy cyclical effects in the CRD and other regulatory issues that became priorities as a consequence of the crisis: CEBS, Annual Report 2008, 8–9; CEBS, Annual Report 2009, passim.
84 CEBS Charter, Art 5.6. Note the ‘obligation’ to comply with CEBS guidance inserted into the Capital Requirements Directive, with effect from December 2010 (discussed further below). But while Member States are instructed by this amendment to follow Level 3 guidance, the new provisions also envisage the possibility of non-compliance, in which case reasons must be stated. Overall, this looks more like a comply or explain requirement than an absolute obligation.
85 Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions  OJ L177/1; Directive 2006/49/EC of the European Parliament and of the Council on the capital adequacy of investment firms and credit institutions  OJ L177/201; together known as the Capital Requirements Directive or CRD.
86 See generally CEBS, Electronic Guidebook.
87 See further CEBS, Electronic Guidebook, Appendix 1 (internal governance compilation).
88 CEBS Charter, Art 5.7; CEBS, Annual Report 2008, 11.
89 CEBS, Annual Report 2006, 5.
90 The working paper version of this chapter (see n 5) contains a Chart showing the CEBS output of guidance and principles between 2004 and 2010.
91 CEBS, Principles on Remuneration (2010) and CEBS, Consultation Paper on Guidelines on Remuneration Policies and Practices (CP42) (October 2010). For the further development of the EU framework for regulation of remuneration in the financial sector see G. Ferrarini, N. Moloney, and M.-C. Ungureanu, ‘Executive Remuneration in Crisis: A Critical Assessment of Reforms in Europe’ (2010) 10 Journal of Corporate Law Studies 73; G.A. Ferrarini and M.-C. Ungureanu, ‘Economics, Politics, and the International Principles for Sound Compensation Practices: An Analysis of Executive Pay at European Banks’ (2011) 64 Vanderbilt Law Review 431; E. Ferran, ‘New Regulation of Remuneration in the Financial Sector in the EU’  European Company and Financial Law Review (forthcoming).
92 CEBS, Annual Report 2009, 52; CEBS, Mediation Protocol (2007).
93 CEBS, Peer Review: Methodology (introduced 2007, revised 2009).
94 CEBS, Peer Review on CEBS’s Guidelines on the Implementation, Validation and Assessment of Advanced Measurement (AMA) and Internal Rating Based (IRB) Approaches (April 2009).
95 CEBS, Mapping of Supervisory Objectives and Powers, including Early Intervention Measures and Sanctioning Powers (March 2009).
96 See CEBS, Survey on the Implementation of CEBS Principles for Internal Governance (November 2009). CEBS, Annual Report 2008, reports, for example, surveys on the operation in practice of liquidity arrangements between the banking and insurance parts of financial conglomerates (at 28) and into banks’ and supervisors’ reactions to the rogue trading loss at Société Générale (at 15).
97 CEBS, Annual Report 2008, 10. CEBS also worked with the ECB with a view to reducing the reporting burden placed on entities that are required to deliver data to the Eurosystem as well as to supervisory authorities: CEBS-ECB, New Classification System Between the Reporting Frameworks of the ECB and CEBS (February 2010).
98 In its first annual report in 2004, CEBS declared (at 24) that its aim was ‘to develop a comprehensive yet flexible framework of cooperation which will ensure financial stability in a changing environment’. In its 2010 work programme, CEBS noted that ‘promoting supervisory cooperation and coordination through colleges of supervisors has been high on the agenda of CEBS since its inception’.
99 Directive 2006/48/EC, recital 14 and Arts 23–28 (home MS authorization giving Community-wide passport) recital 21, Arts 29–37, 40–42, 124–129 (home MS responsible for financial soundness/solvency supervision including consolidated supervision of banking group; host MS responsible for supervision of liquidity of branches and certain powers to take protective/precautionary measures; home and host MS cooperation in supervision of market risk).
100 Directive 2006/48/EC, recitals 23–26, Arts 42–52.
101 In particular, Directive 2006/48/EC, Arts 129–132.
102 eg CEBS, Guidelines for Cooperation between Consolidating Supervisors and Host Supervisors (January 2006).
103 MoU concluded in May 2005. This MoU complemented a 2003 MoU on cooperation in crisis situations that was developed by the Banking Supervision Committee of the ESCB: see discussion in CEBS, Annual Report 2004, 24.
104 CEBS, Annual Report 2008, 8.
105 de Larosière Report, see n 14, at 71–4.
107 Practice had already been already evolving in the direction of establishing cooperation within colleges (ie permanent, flexible structures for cooperation and coordination among the authorities responsible for and involved in the supervision of the different components of cross-border banking groups): CEBS, Good Practices on the Functioning of Colleges of Supervisors for Cross-Border Banking Groups (April 2009); CEBS-CEIOPS, Colleges of Supervisors—10 Common Principles (January 2009). See also CEBS, Annual Report 2008, 10 and 14 (noting commitments by CEBS’s Members to establish colleges for all major cross-border banks in Europe by the end of 2009).
108 Directive 2009/111/EC of the European Parliament and of the Council of, of 16 September 2009, amending Directives 2006/48/EC, 2006/49/EC, and 2007/64/EC  OJ L302/97 (Capital Requirements Directive II/CRD II).
109 CEBS, Guidelines for the Operational Functioning of Colleges (June 2010). The mandate to CEBS was provided by Directive 2006/48/EC, Art 131(a)(2) (as amended).
110 CEBS, Annual Report 2009, 15.
111 CEBS, Annual Report 2009, 10.
112 CEBS Charter, Art 4.5.
113 CEBS, Annual Report 2009, 10.
114 CEBS, Annual Report 2008, 24–29 provides a summary of 3L3 work from CEBS’s perspective. Also CEBS, Annual Report 2009, 42–3.
115 CEBS, Annual Report 2008, 11; CEBS, Annual Report 2009, 12 and 16.
116 CEIOPS Charter, Art 6; Articles of Association, Art 7.
117 CEIOPS, Annual Report 2009, Annex A.2.
118 CEIOPS Articles of Association, Art 4(4); Decision 716/2009/EC.
119 CEIOPS, Annual Report 2009, 15–16.
120 CEIOPS, Annual Report 2009, 54–5.
121 Directive of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II)  OJ L335/1 (MS implementation due by October 2012).
122 CEIOPS, Level 3 Guidance on Solvency II: Pre-Application Process For Internal Models (CEIOPS-DOC-76/10).
123 CEIOPS, Annual Report 2009, 62–75.
124 CEIOPS, Annual Report 2009, 60–1.
125 CEIOPS, Annual Report 2009, 46–7.
126 From the outset, it was recognized that the Level 3 improvements were just a start and that ‘In the longer term, far more fundamental convergence is necessary’: Lamfalussy Report, see n 16, at 123. On CESR as a ‘good beginning’ see discussion in E. Ferran, Building an EU Securities Market (Cambridge University Press, 2004), 123 and CESR’s self-assessment of its ability to change and adapt: CESR, Which Supervisory Tools, see n 32, at 2.
127 eg the objective of enhancing the Community dimension in the mandate of national supervisors has featured on the list of desirable additional tools for quite some time, being advocated, for example, in CESR, Which Supervisory Tools, see n 32, at 15. CESR (at 16) even raised the possibility of being empowered to take single EU-wide decisions but thought that this ‘far-reaching solution’ should remain in the background while other options were explored.
ECOFIN (Council Conclusions—The EU Supervisory Framework and Financial Stability Arrangements (8515/3/08, May 2008)) called upon Member States to ensure that the mandates of national supervisors would allow them to take the EU dimension into account in exercising their duties. For implementation of this idea into EU law up to 2010 see Directive 2006/48/EC (amended by Directive 2009/111/EC (CRDII)), Art 40(3) (duty on MS supervisors to consider potential impact of their decisions on the stability of the financial system in all other Member States concerned) and Art 42(b) (duty on Member States to ensure that their national supervisors participate in CEBS, follow CEBS Level 3 guidelines (or explain non-compliance) and that supervisors’ national mandates do not inhibit performance of their duties as Members of CEBS).
128 Directive 2006/48/EC, Art 131(a) (as inserted by Directive 2009/111/EC). The consolidating supervisor is the competent authority responsible for the exercise of supervision on a consolidated basis. CRD II also put onto a legal footing colleges of supervisors for banks with significant branches in other Member States: Art 42(a)(3) (as inserted by Directive 2009/111/EC).
130 Directive 2009/111/EC, recital 12 and Directive 2006/48/EC, Art 129 (amended by Directive 2009/111/EC) (revising arrangements for supervisory determination of the adequacy of the level of own funds held by a banking group and putting in place a procedure for national supervisors to be able to consult CEBS if they failed to reach agreement among themselves).
131 Directive 2009/111/EC, Recs 12–16; O. Karas, Report on the Proposal for a Directive of the European Parliament and of the Council amending Directives 2006/48/EC and 2006/49/EC (A6-0139/2009). The rapid evolution of supervisory arrangements for credit rating agencies (CRAs) also illustrates this point. European arrangements for the supervision of CRAs are discussed further in paras 5.75–5.79.
132 The political leaders of the Member States and the EU political and legislative Institutions had already been calling for the strengthening of EU-level supervision, so the members of de Larosière Group would have known that they were pushing at a relatively open door.
133 Regulation (EU) 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority  OJ L331/12 (EBA Reg)); Regulation (EU) 1094/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority)  OJ L331/48 (EIOPA Reg); Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority)  OJ L331/84 (ESMA Reg). Although there are contextual differences, in the main the substance of the three Regulations is the same. For convenience, these notes use the shorthand ‘ESA Regs’ as a collective term for the three Regulations where the same provision is found in each of them.
136 This was advocated in particular by the ECON Rapporteur on the proposal to establish the European Systemic Risk Board (ESRB): ECON, Report on the proposal for a regulation of the European Parliament and of the Council on Community macro prudential oversight of the financial system and establishing a European Systemic Risk Board (A7-0168/2010, Rapporteur: S. Goulard), 51–2.
137 K. Lannoo, The Road Ahead after De Larosière (CEPS Policy Brief, 2009). One measure of the political sensitivity of this issue is that even the British tabloid press took notice of the United Kingdom’s ‘victory’ in preventing a shift of location from London to Frankfurt: T. Newton Dunn, ‘Osborne Beats the Germans’ The Sun, 14 July 2010, 2.
138 de Larosière Report. see n 14, at 58 (potential merit in moving to this structure over time). Charles Goodhart and Dirk Schoenmaker have argued for this, suggesting one authority for prudential supervision (banking and insurance) and one authority for market conduct: ft.com/economistsforum, 13 March 2009. See also, Wymeersch, ‘The Institututional Reforms’, see n 58. Compare A. Turner, The Turner Review: A Regulatory Response to the Global Banking Crisis (FSA, March 2009), 102, noting UK support at that time for a single EU authority. However, the new government has since embarked on domestic reform that will put in place an objectives-oriented (broadly twin peaks) institutional model: Ferran, ‘The Break-up’, see n 10.
141 ESA Regs, Arts 40–53.
144 EBA Reg, Art 40(1)(d).
145 EBA Reg, Art 40(7); EIOPA Reg, Art 40(5); ESMA Reg, Art 40(6).
146 EBA Reg, Art 40(4). Provision is also made for authorities that administer deposit and investment protection schemes to attend as appropriate in a non-voting capacity: EBA Reg, Art 40(6) and ESMA Reg, Art 40(5).
149 Open Europe, Shifting Powers: What the EU’s Financial Supervisors will Mean for the UK and the City of London (September 2010).
150 ESA Regs, Arts 45–7. The Commission representative has voting rights in respect of budget approvals: ESA Regs, Art 45(2) and Art 63.
154 ESA Regs, Art 48(3)–(4).
156 ESA Regs, recital 55.
158 ESA Regs, Art 51(3)–(5).
159 ESA Regs, Art 1(5) (Authority), Art 42 (Chairperson and Board of Supervisors’ voting members), Art 46 (Management Board), Art 49 (Chairperson), Art 52 (Executive Director).
161 ESA Regs, Art 3 (accountability to the Parliament and the Council). The ESAs’ Boards of Supervisors must each send an annual report to the European Parliament, Council, Commission, Court of Auditors, and the European Economic and Social Committee: ESA Regs, Art 43(5). These reports must also be made public. The contents of these annual reports must include disclosure of which national supervisors and firms have failed to comply with non-binding guidelines and recommendations under ESA Regs, Art 16 or with opinions and decisions rendered under the compliance procedure set out in ESA Regs, Art 17: ESA Regs, Arts 16(4) and 17(8).
162 ESA Regs, Art 43(4) and (6).
165 In particular, ESA Regs, Art 10 and Art 15 (draft technical standards to be sent to the Parliament and the Council).
167 ESA Regs, Arts 37 and 40(2).
168 ESA Regs, Arts 58–60.
169 ESA Regs, Art 61 and TFEU, Arts 263 and 265.
170 ESA Regs, Art 69. That this issue has not attracted more attention could be thought surprising given the general controversy surrounding questions of supervisory liability to third parties. For a discussion of this general topic: R.J. Dijkstra, ‘Liability of Financial Regulators: Defensive Conduct or Careful Supervision?’ (2009) 10 Journal of Banking Regulation 269.
171 ESA Regs, recital 68 and Art 62.
172 Wymeersch, ‘The Institututional Reforms’, see n 58. Most of the existing EU agencies are funded from the EU budget plus, in some cases, by direct receipt of fees and other payments: European Commission, European Agencies—The Way Forward (SEC(2008) 323), 4. Agencies created under Common Foreign and Security Policy are funded directly by Member States. As at 2008, there was a €559 million contribution from the Community budget to the running of 29 regulatory agencies across the range of Community activity as a whole: SEC(2008) 323.
173 ESA Regs, Art 62(1)(c).
174 ESA Regs, recital 59 and Arts 62–6.
175 On supervisory costs around the world: H.E. Jackson, ‘Variation in the Intensity of Financial Regulation: Preliminary Evidence and Potential Implications’ (2007) 24 Yale Journal on Regulation 253.
176 BaFIN, Annual Report 2008, 225.
177 FSA, Annual Report 2009/10, 68.
181 ESA Regs, Art 31(c). The new power to impose a binding decision to settle supervisory disagreements is considered further in paras 5.71–5.74.
182 ESA Regs, Arts 29 and 31.
189 ESA Regs, Art 2(3), Art 8(1)(d), Arts 22–3, Art 32, and Art 36.
190 ESA Regs, Art 28 provides a legal basis for delegation agreements between national supervisors.
192 The pros and cons of different models for the institutional organization of financial market supervision are discussed in Ferran, ‘The Break-Up’, see n 10.
194 ESA Regs, Arts 10–15.
195 ESA Regs, Art 1(2) lists the current substantive EU legislation under which each ESA may act and provides for the ESA also to act within the scope of any future EU legislation that confers tasks on it. The particular areas in which an ESA may develop technical standards are set out in the substantive legislation. Directive 2010/78/EU of the European Parliament and of the Council of 24 December 2010 amending Directives 1998/26/EC, 2002/87/EC, 2003/6/EC, 2003/41/EC, 2003/71/EC, 2004/39/EC, 2004/109/EC, 2005/60/EC, 2006/48/EC, 2006/49/EC, and 2009/65/EC in respect of the powers of the European Supervisory Authority (European Banking Authority), the European Supervisory Authority (European Insurance and Occupational Pensions Authority) and the European Supervisory Authority (European Securities and Markets Authority)  OJ L331/120 makes the first set of amendments to existing EU legislation for this purpose. This Directive is known as ‘Omnibus I Directive’. The ‘Omnibus II’ Directive, which will make changes to the Solvency II Directive and further amendments to the Prospectus Directive is in the pipeline: European Commission Proposal for a Directive of the European Parliament and of the Council amending Directives 2003/71/EC and 2009/138/EC in respect of the powers of the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority (COM(2011) 8).
196 Proposals illustrating this point that emerged during 2010 included European Commission, Proposal for a Regulation on Short Selling and Certain Aspects of Credit Default Swaps (COM(2010) 482); European Commission, Proposal for a Regulation on OTC Derivatives, Central Counterparties and Trade Repositories (COM(2010) 484). For follow up, see Regulation 236/2012 of the European Parliament and of the Council of 14 March 2012 on short selling and certain aspects of credit default swaps  OJ L86/1; Regulation of the European Parliament and of the Council of on OTC derivatives, central counterparties and trade repositories (final text adopted by European Parliament, 29 March 2012).
197 Omnibus I Directive, recital 9.
198 European Commission, Proposal for Omnibus I Directive (COM(2009) 576), 5.
199 Omnibus I Directive, recitals 10–12; ESA Regs, Arts 10(1) and 15(1).
200 Omnibus I Directive, Art 5, amending Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading  OJ L345/64.
201 European Commission, Proposal for a Regulation Establishing ESMA (COM(2009) 503).
202 Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids  OJ L142/12, Art 20.
203 ESMA Reg, Art 1(3) provides for the ESMA to ‘take appropriate action in the context of take-over bids’.
204 That Member States should not add to EU rules is gradually becoming the default policy position in the EU financial market regulation. This trend is continued in Omnibus I Directive, recital 14, which makes clear that Member States do not have unbridled power and can only require additional information or impose more stringent requirements to the extent that certain requirements in Union legislative acts are not fully harmonized and when those legislative acts provide for such discretion, and only in specific areas allowed by technical standards.
205 House of Commons Treasury Committee, Proposals for European Financial Supervision: Further Report (HC 37, November 2009), which includes evidence from a number of parties about the potential for technical standards to encroach on matters of supervisory judgment.
206 Sants, ‘UK Financial Regulation’, see n 1.
208 Case 9/56 Meroni v High Authority [1957–58] ECR 133. On the continuing vitality of this rule in positive law see S. Griller and A. Orator, ‘Everything Under Control? The “Way Forward” for European Agencies in the Footsteps of the Meroni Doctrine’  European Law Review 3.
209 TFEU, Art 290 (delegated acts) and TFEU, Art 291 (implementing acts).
210 Wymeersch, ‘The Institututional Reforms’, see n 58.
211 On controls generally in respect of powers under TFEU, Arts 290 and 291: European Commission Communication, Implementation of Article 290 of the Treaty on the Functioning of the European Union (COM(2009) 673); Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission’s exercise of implementing powers  OJ L55/13.
212 Omnibus I Directive, recitals 22–5.
213 Note the European Parliament rapporteur on the EBA regulation—‘the European Banking Authority’s leading role in drawing up these standards must be stressed’: ECON, Report on the proposal for a regulation of the European Parliament and of the Council establishing a European Banking Authority (A7-0166/2010, Rapporteur: J.M. García-Margallo y Marfil, EBA Report), 131.
214 There is provision for the Commission to act without an ESA draft (ESA Regs, Arts 10(3) and 15(3)) but only where the ESA has failed to do what is expected of it within relevant deadlines.
215 EBA Reg, recital 23; EIOPA Reg, recital 22; ESMA Reg, recital 23.
216 ESA Regs, Arts 10(1) and 15(1).
217 ESA Regs, Arts 10(1) and 15(1). Amendment would be permissible therefore if the draft standards are incompatible with EU law, do not respect the principle of proportionality, or run counter to fundamental principles of the internal market: EBA Reg, recital 23; EIOPA Reg, Rec 22; ESMA Reg, recital 23.
218 ESA Regs, Art 14. This procedure does not apply to implementing technical standards.
219 TFEU, Art 290(2); ESA Regs, Art 13.
220 TFEU, Art 290(1) and ESA Regs, Art 12.
221 Regulation (EU) No 182/2011.
222 ESA Regs, Art 10(1) and Art 15(1). Consultations and costs-benefit analyses may be omitted if they would be disproportionate or because of the particular urgency of the matter: ibid.
223 Established under ESA Regs, Art 37.
225 Two of the European Parliament rapporteurs on the proposals to establish the ESAs (García, EBA Report, see n 213; S. Giegold, ESMA Report (A7-0169/2010)), suggested a more streamlined procedure in which an ESA could make a decision without having to go through the Commission first.
226 ie specified by name in ESA Regs, Art 1(2) or by means of its reference to ‘any other legally binding Union act which confers tasks on the Authority’.
227 ESA Regs, Art 17. This procedure is without prejudice to the Commission’s enforcement powers under TFEU, Art 258.
229 ESA Regs, Art 17(2)–(3).
231 ESA Regs, Art 17(4)–(5).
234 ESA Regs, Art 60 (Appeals) and Art 61 (Actions before Court).
236 ESA Regs, Art 17(7). This precedent setting effect also applies to Commission formal opinions.
238 ESA Regs, Art 2(4)–(5).
239 ESA Regs, Art 35 (collection of information from competent authorities needed for performance of duties) and Art 17(2) (competent authorities’ assistance with inquiry into alleged breach of EU law). An ESA may also request information from other public bodies in Member States: Art 35(5). As a last resort an ESA may address a duly justified and reasoned request for information directly to a financial market participant: ESA Regs, Art 35(6).
242 ESA Regs, Art 18(2). The Council can be requested to make such a determination by an ESA, the Commission or the European Systemic Risk Board: ibid.
243 ESA Regs, Art 18(3). ‘Specified’ refers to ESA Regs, Art 1(2).
249 ESA Regs, Art 38(3)–(4). The decisions are to be made on the basis of simple majorities.
250 The Council has 10 working days to come to its initial decision and four weeks (which it can extend by an additional four) to make a decision on a re-examination. If a Member State refers the matter to the Council, the ESA’s decision is suspended until the Council makes its initial decision.
252 ESA Regs, Art 41(2) (independent panels to facilitate agreement and, if none is reached, to propose a decision); ESA Regs, Art 44(1) (decision-making procedures with special provision for blocking minorities).
254 Omnibus I Directive, recital 18 stating that this Directive makes provision for the ‘first set’ of cases and is without prejudice to the possibility of adding cases in future.
255 Omnibus I Directive, Art 6 (Amendments to Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments  OJ L145/1 (Mi-FID)).
256 Ibid, amending MiFID, Art 62.
258 On the precedent setting effect: ESA Regs, Art 19(5). On reporting requirements: ESA Regs, Art 19(6).
261 EBA Reg, recital 32; EIOPA Reg, recital 31; ESMA Reg, recital 32.
262 eg European Council, June 2009 (‘overwhelming majority’ of Heads of State/Govt in favour; minority concerned about fiscal sovereignty); de Larosière Report (see n 14), 40–1.
263 de Larosière Report, see n 14, at 19–20, 53.
264 Such as post-trading infrastructures, a possibility also mentioned in the de Larosière Report, see n 14, at 53.
265 D. Curtin, ‘Delegation to EU Non-Majoritarian Agencies and Emerging Practices of Public Accountability’ in D. Gerardin and N. Petit (eds), Regulation Through Agencies in the EU, A New Paradigm of European Governance? (Routledge, 2005), ch 5, 88–119.
266 European Commission, European Governance: A White Paper (COM(2001) 428), 24.
267 Regulation (EC) 1060/2009 of the European Parliament and of the Council of 16 September 2009 on Credit Rating Agencies,  OJ L302/1, as amended by Regulation (EU) 513/2011 of the European Parliament and of the Council of 11 May 2011.
268 European Commission, Impact Assessment Accompanying document to the Proposal for a Regulation amending Regulation (EC) No 1060/2009 (SEC(2010) 678). The set-up of other euro-agencies also follows this type of arrangement: see eg Regulation (EC) 216/2008 of the European Parliament and of the Council of 20 February 2008 on common rules in the field of civil aviation and establishing a European Aviation Safety Agency  OJ L 79/1.
269 ESA Regs, Art 81 provides for a general review every three years. Article 81 further provides that with respect to the issue of direct supervision of institutions or infrastructures of pan-European reach, the Commission must draw up an annual report on the appropriateness of entrusting each ESA with further supervisory responsibilities in this area.
270 This account of EMIR is based on the text agreed by the Council in October 2011. References to specific provisions are not given because the numbering in the final version of the legislative text could differ from this draft.
272 Regulation 236/2012 of the European Parliament and of the Council of 14 March 2012 on Short Selling and Certain Aspects of Credit Default Swaps  OJ L86/1.
273 Short Selling Regulation, Art 27.
274 Short Selling Regulation, Art 28. This intervention power does not extend to sovereign CDS transactions and positions.
275 The conferral of this power on ESMA raises Meroni issues in that it could be said that its exercise must inevitably involve the exercise of a wide discretionary power involving policy choices.
276 European Commission, Review of the Markets in Financial Instruments Directive (Mi-FID) (Public Consultation, 8 December 2010), 12–13; European Commission, Proposal for a Regulation on Markets in Financial Instruments (COM(2011) 652), Art 26 (MiFIR).
278 Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers  OJ L174/, Art 47 (AIFMD).
279 D. Charter and M. Costello, ‘French Set to Stall European Hedge Fund Directive’ The Times, 29 September 2010, 34 (discussing a French government proposal for ESMA to administer the passport system). See further E. Ferran, ‘After the Crisis: Hedge Funds and Private Equity’  European Business Organization Law Review 379.
280 C. Goodhart and D. Schoenmaker, ‘Should the Functions of Monetary Policy and Banking Supervision Be Separated?’ (1995) 47 Oxford Economic Papers 539 (de-scribing this as the guiding principle for crisis management).
281 Proposed OTC Derivatives Regulation, recital 30.
282 W. Fonteyne, W. Bossu, L. Cortavarria-Checkley, A. Giustiniani, A. Gullo, D. Hardy, and S. Kerr, Crisis Management and Resolution for a European Banking System (IMF Working Paper, WP/10/70).
283 Fonteyne et al, ‘Crisis Management’, Ibid (system strained to a ‘breaking point’). Turner, The Turner Review, see n 138, at 100 (situation ‘inadequate and unsustainable for the future’); de Larosière Report, see n 14, at 12 (EU response to crisis weakened by an inadequate crisis management infrastructure in the EU).
284 European Commission, An EU Framework for Cross-Border Crisis Management in the Banking Sector (COM(2009) 561); European Commission, Bank Resolution Funds (COM(2010) 254); ECON, Cross-Border Crisis Management in the Banking Sector (A7-0213/2010, Rapporteur: Elisa Ferreira); European Parliament, European Parliament resolution of 7 July 2010 with recommendations to the Commission on Cross-Border Crisis Management in the Banking Sector (T7-0276/2010); European Commission, An EU Framework for Crisis Management in the Financial Sector (COM(2010) 579).
285 Member States’ finance ministries have expressed different views on the desirability of establishing such a network of funds reserved for resolution purposes. Some (such as the United Kingdom and France) wanted funds raised from bank levies to be available for general budgetary purposes and have established national bank levy funds on that basis: ECOFIN, State of Play on Financial Levies and Taxes: Report to the European Council (19 October 2010).
286 At the first stage a network of national resolution funds is envisaged but it is clear that the Commission has in mind a single EU fund as the eventual aim: COM(2010) 579, para 5.3. MEPs have supported the idea of a single pan-EU fund under the responsibility of the EBA: A7-0213/2010; T7-0276/2010.
288 Quoted by Lord Pearson in UK parliamentary debate: Hansard, HL, 2 July 2009, col 328.
289 See I. Begg, ‘Regulation and Supervision of Financial Intermediaries in the EU: The Aftermath of the Financial Crisis’ (2009) 47 Journal of Common Market Studies 1107, 1121 (suggesting that full-blown EU competence remains too implausible politically to be worth elaborating but that a model in which there is some federalization of supervisory power merits consideration).
290 Wymeersch, ‘The Institututional Reforms’, see n 58.
291 eg AIFM Directive, Art 69 (review of Directive fours years after transposition date specifically to include examination of possibility of entrusting ESMA with further supervisory responsibilities in the field of authorization and supervision of non-EU AIFM).
292 Quoted in S. Collins ‘Ministers Secure “Triple Lock” Against Financial Watchdogs’ Europolitics, 3 December 2009.
293 Griller and Orator, ‘Everything Under Control?’ (see n 208). Special accountability arrangements have been fashioned for the ECB but there are still concerns about their effectiveness: F. Amtenbrink, ‘On the Legitimacy and Democratic Accountability of the European Central Bank: Legal Arrangements and Practical Experiences’ in A. Arnull and D. Wincott, Accountability and Legitimacy in the European Union (Oxford University Press, 2002), ch 9; F. Amtenbrink and K. van Duin, ‘The European Central Bank Before the European Parliament: Theory and Practice after 10 Years of Monetary Dialogue’ (2009) 34 EL Rev 561; P. Magnette, ‘Towards Accountable Independence? The European Central Bank and the Rise of Parliamentary Controls’ (2000) 6 ELJ 326.
294 See eg Basel Committee, Core Principles for Effective Banking Supervision (2006).
295 Beetsma and Eijffinger, see n 7.
296 Greenwich Associates, European Financial Regulation: Private Sector Perspectives on the Powers of the ESAS and Other Reforms (August 2010).
297 C. Goodhart, P. Hartmann, D. Llewllyn, L. Rojas-Suárez, and S. Weisbord, Financial Regulation: Why, How and Where Now (Routledge, 1998), 147.