What‘s in a name? Who knows the difference between EIOPA’s supervisory statements and statements?
EIOPA has recently issued several statements. For the attentive reader, there is a difference when such a statement is called a supervisory statement or simply a statement. Surprised? So, what’s in a name? Let us first focus on Supervisory Statements. EIOPA issued in 2017 its first Supervisory Statement. EIOPA defines on its website today Supervisory Statements as follows: “Supervisory Statements often aim to present finding on current practices observed and indicate areas for improvement. The statements are directed to National Supervisory Authorities (NSAs) as well as insurance and reinsurance undertakings.”
The legal basis according to EIOPA is Article 29(2) of the EIOPA Regulation. Article 29(2) has been revised in 2019 and reads as follows:
The Authority may, as appropriate, develop new practical instruments and convergence tools to promote common supervisory approaches and practices.
For the purpose of establishing a common supervisory culture, the Authority shall develop and maintain an up-to-date Union supervisory handbook on the supervision of financial institutions in the Union, which duly takes into account the nature, scale and complexity of risks, business practices, business models and size of financial institutions and of markets. The Union supervisory handbook shall set out best practices and shall specify high-quality methodologies and processes.
The Authority shall, where appropriate, conduct open public consultations regarding the opinions referred to in point (a) of paragraph 1, tools and instruments referred to in this paragraph. It shall also, where appropriate, analyse the related potential costs and benefits. Such consultations and analyses shall be proportionate in relation to the scope, nature and impact of the opinions or tools and instruments. The Authority shall, where appropriate, also request advice from the relevant Stakeholder Group referred to in Article 37.”
The first subparagraph of Article 29(2) allows indeed that EIOPA develops “new practical instruments and convergence tools” in the interest of “common supervisory approaches and practices”. This is nothing new. This competence existed already in 2017 and was not changed in the ESA review. However, subparagraphs 2 and 3 of this paragraph 2 of Article 29 have been added in 2019, to be applied as of 1 January 2020. These subparagraphs require the Authority to conduct open public consultations regarding the tools and instruments, analyse costs and benefits, and request advice from the relevant Stakeholder Group, all this where appropriate. In addition, these consultations and analyses need to be proportionate relative to the scope, nature and impact of the tools and instruments. These additions reflect the need for more prior consultations and cost-benefit analysis.
Since the start of the COVID-19 crisis, EIOPA issued three supervisory statements. Adding the one of February 2020, four supervisory statements (see list here) have been published in 2020.
Some observations:
None of the supervisory statements published in 2020 refers to its legal base. To include a sentence similar to the one used in recommendations would have been helpful. This could read as follows: “In accordance with Article 29(2) of Regulation (EU) No 1094/20101 (EIOPA Regulation), EIOPA is issuing this Supervisory Statement…”.
In two cases, the denomination “supervisory statement” has not been used, but rather the denomination “EIOPA Statement” and “Supervisory expectations”. This creates confusion.
In one of the supervisory statements, titled Supervisory expectations on Product Oversight and Governance requirements amidst the COVID-19 situation, there is no EIOPA BoS reference. One might therefore presume that this communication is not a supervisory statement, also because it follows, thus EIOPA, on the statement issued on 1 April 2020. How can one know this document to be a Supervisory Statement?
As regards the statements, these are not the same as Supervisory Statements according to EIOPA. These have consequently not even the validity of a tool or instrument according to Article 29(2). Their content is even more light years away from guidelines and recommendations. These should consequently be treated as such.
It remains an enigma why certain statements are Supervisory Statements and other are just ‘statements’. I am sorry to confess that I was unable to understand the logic. What is the defining factor?
One could argue that the distinguishing factor is the process. But the facts speak against this argument: in the case of supervisory statements, and despite the applicability of the new EIOPA Regulation since 1 January 2020, including its new Article 29(2), no public consultation has taken place, nor a cost/benefit analysis, nor has the appropriateness or inappropriateness of such a (non-)consultation and (non-)analysis been explained, despite these being explicitly foreseen in Article 29 (2) 3rd subparagraph.
Can it be that during the COVID-19 crisis these tools were the answers for replacing recommendations and opinions? Surely the COVID-19 crisis has turned a lot of organisations upside down and the times are challenging, but should we not be careful while respecting our legal framework?
One final thought: in the end, whether the statement is a Supervisory Statement or just a statement, none of these are legally enforceable.
This blog article is a short version of a longer article into this matter. For more information on the longer article, please contact the author, Lieve Lowet.
