Negotiators from the European Parliament and the Romanian Presidency of the Council of the EU failed to reach an agreement on Tuesday evening, 12 March, on the reform of the European financial supervision architecture (see EUROPE 11864/1).
"Unfortunately, after ten hours of marathon negotiations with Member States, no political agreement on the reform of European financial market supervision, which I am negotiating with Pervenche Berès for the European Parliament, is yet possible", said MEP Othmar Karas (EPP, Austria) on Twitter. Negotiations resume this Thursday, March 14 from 9am to 12pm.
According to several sources, a series of points could nevertheless be closed. This is particularly the case for the ‘anti-money laundering’ component. The co-legislators would move towards a "prior consultation" within a set time frame - and not a "prior consent" as requested by the Council of the EU - of the European Insurance and Occupational Pensions Authority (EIOPA) or the European Securities and Markets Authority (ESMA) for certain decisions taken by the European Banking Authority (EBA) in this area.
The provisions on ESMA's direct supervisory powers would also be stabilised. The European Parliament would be prepared to abandon the direct supervisory competence for prospectuses while that for some financial indicator administrators should be retained in the text.
All that remains is the thorny issue of governance, as well as some "minor issues".
Governance: it passes or breaks
All our sources agree that this is where the heart of the negotiations lies (see EUROPE 12207/15). The co-legislators also discussed the subject on Tuesday evening, but from the outset it was clear that no agreement could be reached, in their view.
This will either be the point of consensus towards a global agreement or the stumbling block to the failure of the negotiations, a parliamentary source said. Another source indicated that everything would be decided on Thursday, excluding the holding of an additional 'trilogue'.
"Many of the existing powers of the financial supervisory authorities (FSAs) have never been used, because the national member authorities have blocked through the internal decision-making. That must change", said Sven Giegold (Greens/EFA, Germany) in a statement on Monday.
It is indeed this logic that prompted the European Commission to propose the creation of an independent executive board in each of the ESAs. This board would be responsible for taking decisions in several areas, to replace the management board.
While decision-making has so far been largely dominated by the board of supervisors (BoS), this change seems difficult for Member States to accept, as they see it as a reduction in the powers of their national authorities and believe that they are more familiar with the situation on the ground.
In this regard, the composition of the independent executive board is particularly important. The European Parliament is focusing on the independence of its members while the Council of the EU is trying to reintroduce representatives of national authorities.
The Commission had proposed that the independent executive board should be composed of a Chair, three full-time independent members for EBA and EIOPA, and a Chair and five full-time members for ESMA. The Parliament largely agrees with this line, with the exception that it wants four independent members instead of five for ESMA.
But the Council of the EU wishes to return to the current composition of the management board with a Chair and six BoS members, adding only two full-time independent members.
Three options on the table
To overcome the impasse, several sources confirmed to us that three different options had been tabled by the Commission, Mr Karas and Mrs Berès. The Romanian Presidency is due to return to the Parliament by Thursday, after consulting the Member States.
Option A attempts to balance the composition with three BoS members, three independent members and a chairperson. The President would have a casting vote both on the BoS and on the board. This solution also includes a stronger involvement of the Parliament in the procedure for appointing the President.
Option B reflects the composition desired by the Council of the EU for the board, but also provides for a 'double vote' for independent members in some cases and a casting vote for the Chair.
Finally, Option C suggests maintaining the status quo with regard to the composition of the board, but significantly increases the powers of the chairperson on a range of issues.
Financing. The issue of financing the ESAs would also have posed difficulties for the co-legislators on Tuesday evening. It appeared that maintaining the status quo - namely 60% of contributions from national authorities and 40% of the EU budget - as desired by the Council of the EU, was not possible, a parliamentary source said.
In its initial proposal, the Commission proposed to involve industry in the budget of the European authorities. This possibility would have been taken into account in the negotiations on the post-2020 multiannual financial framework and the status quo would then create a "hole" in the budget, explained the same source.
The European Parliament had suggested a contribution from the general budget of the Union of at least 35% and a contribution from the competent national authorities of up to 65%. (Original version in French by Marion Fontana)