New Competences for the European Banking, Insurance & Pension and Financial Market Authorities (ESAs)

Last December, the European Union concluded the ESA review with the publication of the ESA review legislation in the Official Journal. It consists of 3 legislative acts:

• Regulation (EU) 2019/2175 which amended the EBA regulation, the ESMA regulation, the EIOPA regulation, MIFIR, the benchmark regulation and the funds transfer regulation. The amendments focused on giving new competences as well as on clarifying existing competences. Most new powers of the ESA started on 1 January 2020.
• Regulation (EU) 2019/2176 which amended the ESRB regulation and which came into force on 30 December 2019; and
• Directive (EU) 2019/2177 : this Directive changes among others a few articles in the SII directive. The transposition date is 30 June 2021. This means that the new provisions related to SII are applicable as of 30/6/2021 except the country specific volatility adjustment adaptation which is applicable as of 1/7/2020.

This publication closes a long review. The new powers of EIOPA include for example the possibility to set up cooperation platforms in case of insurers which are active cross-border via branches and where there is a justified concern to worry about policyholder protection.

The ESAs will get a more important role in the area of sustainable finance and in fintech. Ten years after the financial crisis and the establishment of the new supervisory system, financial services and the Capital Markets Union will be increasingly driven by two major developments: sustainable finance and technological innovation. Both have the potential to transform financial services and the European Union’s system of financial supervision should be equipped for them.

• This means that the ESAs should play an important role in identifying and reporting risks that environmental, social and governance related factors pose to financial stability, and in rendering financial markets activity more consistent with sustainability objectives. The ESAs should provide guidance on how sustainability considerations can be effectively embodied in relevant Union financial legislation and promote coherent implementation of those provisions upon adoption. When initiating and coordinating Union-wide assessments of the resilience of financial institutions to adverse market developments, the ESAs should duly consider risks that environmental, social and governance related factors could pose to the financial stability of those institutions.
• Technological innovation has had an increasing impact on the financial sector and various competent authorities have taken various initiatives to deal with those technological developments. In order to continue promoting supervisory convergence and to exchange best practices between relevant authorities on the one hand, and between relevant authorities and financial institutions or financial market participants on the other hand, the role of the ESAs with regard to their oversight function and supervisory coordination should be strengthened.

In addition, EBA has also received a leading, coordinating and monitoring role at Union level to prevent the use of the financial system for money laundering and terrorist financing purposes for all financial sector operators. By concentrating that mandate for the entire financial sector within EBA, the European legislator hopes to optimise the use of EBA’s expertise and resources. Also, it is in the banking sector that money laundering and terrorist financing risks are most likely to have systemic impact.

All national supervisory authorities are represented in the Board of each ESA.

Lieve Lowet