Plans for a new pan-European securities regulator with the power to over-rule national supervisory bodies moved a step closer on 2 September, following a deal between the European Parliament and the European Council.
The agreement paves the way for a new regulatory structure for the European banking, securities and insurance industries to be in place by January 2011. However, the agreement must first be approved by the European Council on 7 September and voted on by Members of the European Parliament (MEPs) later in the month.
European commissioner for the single market Michel Barnier welcomed the agreement as moving financial supervision to a new level in Europe.
“Financial companies and markets operate mostly at a European level, and we’ll now have four solid authorities to monitor macroeconomic financial risks and to supervise financial markets, banks, and insurance companies. These authorities will be able to benefit from the on-the-ground expertise of national regulators and supervisors and propose any necessary measures at a European level,” he said.
Barnier added that the European Commission would present legislation on derivatives and short-selling “in the following days” that would build on the powers of the new authorities.
Subject to subsequent votes, the European Systemic Risk Board will oversee three new EU supervisory authorities (ESAs) – including ESMA, the European Securities Markets Authority – that will work in concert with national supervisors to ensure tighter supervision of cross-border financial institutions. According to a statement issued by the European Parliament, ESAs will also be able to impose “legally-binding mediation” or impose supervisory decisions on financial institutions if no agreement can be reached at the national level.
For the securities industry, this means that the Committee of European Securities Regulators (CESR), which was responsible for co-ordinating and harmonising securities regulation in Europe, will be replaced by a body that will be able to enforce compliance with MiFID and related legislation. The new regulatory body will monitor how national supervisors implement their obligations under EU law and will be able to investigate particular institutions or activities to assess the risks they pose to the wider European financial market.
MEPs have also secured a clause that requires the European Commission to report back every three years on whether the powers of the ESAs need to be extended.