After several weeks of difficult negotiations between the European Parliament and the Council of the EU, the reform of the European financial supervision architecture finally reached a positive outcome on Thursday 21 March (see EUROPE 11864/1).
The co-legislators will have pushed the regulatory time limit to the maximum, but they have managed to finalise this dossier by finding a compromise on the governance system of the three European Financial Supervisory Authorities (ESAs) - the last major stumbling block (see EUROPE 12213/23). Several options had indeed been proposed in recent weeks to overcome the impasse (see EUROPE 12217/14 and EUROPE 12214/23).
In the end, there will be no radical revolution in the governance of each European authority. The agreement makes only minor changes and maintains the status quo in the composition of the current management board - which was to be replaced by the independent executive committee, as requested by the Commission and Parliament.
The Management Board will also be empowered to deliver opinions and make proposals, except for matters on which the President of the Authority may propose decisions.
Nevertheless, Parliament has succeeded in obtaining from the EU Council a strengthening of the power of the President of a European authority, who may also propose to the Board of Supervisors (BoS) decisions relating to violations of EU law, binding mediation or investigations into financial products or financial institutions and set the agenda for BoS meetings.
Direct supervision. On the competences of the ESAs, as well, the agreement is far from the European Commission's initial ambition.
The co-legislators have only maintained the direct supervisory powers of the European Securities and Markets Authority (ESMA) for EU critical benchmarks and third country benchmarks as well as for some data reporting service providers.
In contrast, the mandate and powers of the ESAs are strengthened in the areas of consumer protection and environmental, social and governance risks.
Money laundering. The European Banking Authority (EBA) is being given new supervisory powers to combat money laundering. It will now be responsible for collecting information from national authorities, carrying out risk assessments and facilitating cooperation with third countries in cross-border cases.
However, the final text provides that ESMA and the European Insurance and Occupational Pensions Authority (EIOPA) may give their opinion and oppose EBA decisions concerning financial institutions under their supervision within 20 days.
The Commission's proposal to involve industry in the ESA budget was rejected by both the EU Council and Parliament. The text maintains the current system of contributions, which come partly from the EU budget and partly from the competent national authorities, with the possibility of “voluntary contributions from Member States or observer States”.
An agreement at all costs? While the possibility of having an agreement only on the 'anti-money laundering' aspect (see EUROPE 12170/3) had been mentioned for a time by the EU Council and the threat of a failure of interinstitutional negotiations was beginning to loom, the three European institutions welcomed an agreement that will strengthen European financial supervision.
Contacted by EUROPE, Pervenche Berès (S&D, France), co-rapporteur in Parliament, acknowledged that the final text was far from the Commission's initial ambition, supported by Parliament, but pointed to the difficult negotiations with the EU Council.
“I did not want an agreement at any price”, she said, but welcomed some good progress, such as taking climate risk into account, consumer protection and the fight against money laundering.
The Greens/EFA group negotiator, German Sven Giegold, also made no secret of his disappointment. “Many of the Commission's and Parliament's most progressive proposals have been lost due to the Council's resistance”, he said in a statement.
Among the proposals that were dropped, the environmentalist cited strategic monitoring plans developed and overseen by the ESAs, ESMA's direct prospectus powers, the possibility of imposing fines and the new governance framework with an independent executive board empowered to make decisions in areas where there are conflicts of interest with the BoS.
“The bitter pill for all pro-Europeans is the weak compromise on the governance of the authorities”, he said.
But, given the initial differences between Parliament and the EU Council, the conclusion of the negotiations is also a real “relief” for him for this reform which was “on the edge of the abyss”.
The agreement must now be validated within the two European institutions. (Original version in French by Marion Fontana)