MNI: EC To Strengthen European Financial Supervisory Bodies

--Commission Move For Stronger Regulatory Powers Driven By Brexit

--EU Banks, Insurers And Financial Market Firms To Pay Annual Fees To ESAs

By Jean Comte

     BRUSSELS (MNI) - The European Commission is planning to strengthen the

regulatory powers of the three European Supervisory Authorities (ESAs), with

plans set to be officially unveiled later this week, Market News understands.

     According to a draft document obtained by MNI, the three ESAs set for

increased powers are the European Banking Authority (EBA), the European

Securities and Markets Authority (ESMA) and the European Insurance and

Occupational Pensions Authority (EIOPA).

     The proposed changes include better control over FinTech-related issues, an

oversight of environmental and social governance, some general "coordination

powers" and ability to request entity-supervised information when EU law has

been breached. 

     EIOPA will also be able to better supervise insurers' internal risk models,

whereas ESMA will oversee financial benchmarks and approve some of the

prospectuses issued in the EU.

     At the same time, the decision-making processes of the three ESAs will be

strengthened through the creation of executive boards with full-time members --

instead of the management boards, whose members are at the same time officials

from national supervision authorities. 

     The current structure creates "inherent tension between the European

mandate of the ESAs and the national mandate of the competent authorities that

are members of the ESA Boards", the draft document reads.

     All proposed changes will have to be scrutinized by all EU member states

and the European Parliament.

     BREXIT

     The Commission's move towards increased EU-centralised power is down to

Brexit, which they believe makes the case for stronger supervision and removes

the main opponent to stronger EU supervision of financial markets. The UK was,

for instance, always a strong opponent to benchmarks oversight by the ESMA.

     But the move might still encounter opposition from some other member

states. According to one EU source, Luxembourg is already expressing unease at

the stronger powers ESMA is set to place on asset managers.

     If all the proposed changes are accepted by the EU Parliament and member

states, the three ESAs will have to hire more staff -- according to the draft

document, EBA, EIOPA and ESMA will respectively require 29, 35 and 156

additional full-time employees. National supervisors, on the other hand, would

be able to reduce their headcounts.

     "Obviously, the EU commission hopes to see a staff transfer from national

to European supervisors," the lobbyist said. "But that could be sensitive."

     BUDGET

     Implementing the ESAs new powers will require an increased budget for each

of the three ESAs -- something that will be done by asking regulated entities to

pay "supervisory fees" to their ESAs.

     Precise numbers are expected to be detailed later, through delegated acts

issued by the Commission after the adoption of the draft regulation. But an EU

official told MNI the annual fee "should not exceed E1mln per year for the

biggest institutions": that is the EU's systemically important banks. A lobbyist

working on asset management confirmed the figure of E1 million per year for the

biggest entities to MNI, describing it as a relatively small number.

     "Of course, we will lobby against it, but it is not a concern," he said.

     A threshold will be set up to ensure that smaller entities are exempted

from the annual fee, according to the draft text.

     Such a levy currently only exists for ESMA. EIOPA and EBA are only funded

through the EU budget and fees from national supervision authorities.

     The agencies were originally set up in 2011 to ensure consistent

application of EU banking and financial regulation in the wake of the global

financial crisis.

     The ESAs "have played a key role in ensuring that the financial markets

across the EU are well regulated, strong and stable," the Commission draft

document says, but adds that:

     "[T]here remains significant potential to enhance regulatory and

supervisory convergence ... More common direct supervision in targeted areas

will be necessary to ensure more consistent supervisory practices and

implementation of EU rules."

     According to the Commission, there are over 11,600 credit institutions and

investment firms within the EBA's remit, 20,000 entities within ESMA's and

20,000 insurance and pension undertakings within EIOPA's.

--MNI Brussels Bureau; +44 203-865-3851; email: tara.oakes@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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