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--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
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.
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."
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
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: email@example.com
--MNI London Bureau; tel: +44 203-586-2225; email: firstname.lastname@example.org
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