European financial supervision needs more transparency

The European Supervisory Authorities (ESAs) should make their legislation
more transparent and listen to all supervised entities equally, regardless of the
size of their Member State. Finance Finland (FFI) has published its review on
the ESAs, which have now operated for six years.

European financial markets are supervised by three ESAs: the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA). They were founded in 2011 to help strengthen confidence in market supervision, to improve recovery from the financial crisis, and to prevent future crises. The initial plan was to review the ESAs three years into their operations, but the review was delayed by another three years .

”The financial sector stakeholders of different countries have now finalised their reviews of the ESAs’ operations so far and given their views on how they should be developed in the future. The Commission is currently processing the reviews, and its conclusions and possible legislative proposals regarding reforms of the ESAs are expected later this year”, explains Elina Kamppi from FFI.

In FFI’s opinion, the amount of legislation produced by the ESAs is a problem. Not only that, their Level 3 guidelines and recommendations often have to be considered from legislative viewpoints as well, even though they are technically non-binding. National supervisors also implement regulation and guidelines in different ways. This is reflected in the Commission’s aim to harmonise the work of supervisory authorities, which has been set as a key goal in the further development of the Capital Markets Union.

From a political perspective, it is interesting that the EBA is situated in London. They will have to find a new location due to Brexit.

Will the three authorities continue to work independently, or will EBA merge with EIOPA, for example? This could increase ESMA’s role as a market and consumer protection authority”, Kamppi speculates.