On Thursday 9 March, the three European financial supervision authorities raised the question of the human and financial resources available to them to allow them to regularly monitor the equivalence of the financial rules of third countries with the European Union, when the prospect of the United Kingdom leaving the EU could lead to a regulatory shakeup in this area.
The President of the European Banking Authority (EBA), Andrea Enria, told a debate for the committee on economic and monetary affairs of the European Parliament that assessing the equivalence of the banking legislation of a third country with the European prudential rules is an exercise that requires a great many resources, a situation that will negatively affect the EBA's ability to do its job properly.
In view of the President of the European Insurance and Occupational Pensions Authority (EIOPA), Gabriel Bernardino, this question should be taken into account in particular because it is not just a matter of noting whether there are similar rules in place between the EU and a third country, but of making sure that the rules are actually applied. To do this, however, the European supervisors are, at this stage, largely reliant on the supervisors of the third countries.
Agreeing with his counterparts, the President of the European Securities and Markets Authority (ESMA), Steven J. Maijoor, mooted the possibility of invoicing companies from third countries that require an equivalence decision. Unlike financial ratings agencies accredited in the EU, agencies in third countries benefiting from an equivalence decision pay nothing for the right to exercise their activities in the EU, he pointed out. He repeated his request for a revision of the equivalence rules, in particular stressing the fact that in the areas in which the ESMA is competent, the EU called for the equivalence of the rules whilst third countries require European financial players to be established in their jurisdictions in order to carry out their activities (see EUROPE 11722).
The question of resources is regularly raised in the framework of the revision of the mission of European financial supervision authorities (see EUROPE 11195). Where do you find the resources to monitor equivalence decisions if the legislation of a third country changes, asked Sven Giegold (Greens/EFA, Germany).
On behalf of the European Commission, the Director General for Financial Services, Olivier Guersent, reiterated the spirit of the European equivalence rules. As the financial markets are globalised, the matter consists mainly of assessing the degree of risk that the EU is prepared to import, whilst entrusting the responsibility for controlling this risk to a third country.
Referring to the Commission's recent working document on the functioning of the equivalence rules (see EUROPE 11734), the senior European official stressed the importance of applying the rules proportionately on the basis of the level of risk represented by a market segment and the importance of the market of the third country in question. Our working document contains no new proposals, he stressed, but did not rule out the possibility of changes in favour of revisions of sectoral legislative texts on the basis of experience acquired.
The Presidents of EIOPA and ESMA also highlighted the capacity of the equivalence rules to stimulate regulatory convergence between the EU and the legislation of certain third countries. (Original version in French by Mathieu Bion)