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European System of Financial Supervision
European System of Financial Supervision (ESFS)
As a lesson learnt from the financial crisis 2007/2008, the European Union aimed at establishing a more integrated European supervision in order to ensure a true level playing field for all actors at the EU level and to reflect the increasing integration of financial markets within the EU. The introduction of the European System of Financial Supervision (ESFS) in 2010 marks the first time a new supervisory architecture was established at the European level, consisting of three European Supervisory Authorities (ESAs) and a board to monitor systemic risks – the European Systemic Risk Board (ESRB). The ESAs and the ESRB started their operations in January 2011.
Working within a diverse supervisory framework
As an integrated provider of financial services, Deutsche Börse Group comprises the whole range of financial markets infrastructure (FMI) operators, such as central counterparties, central securities depositories, securities settlement systems and a trade repository. It also includes trading venues (regulated markets and multilateral trading facilities) and data reporting services providers.
The Group’s entire value chain is impacted by the ESAs’ work as the Group faces a wide range of different supervisors across the EU – European FMIs operate within a diverse supervisory framework.
Objective
The objectives of the ESFS include developing a common supervisory culture and facilitating a single European financial market in order to ensure consistent and coherent financial supervision in the EU. To this end, the ESFS created a system of micro- and macro-prudential supervision consisting of European and national supervisors. In addition, the supervisors play a role in the field of international cooperation (e.g. ESMA is an observer to the International Organisation of Securities Commission (IOSCO) and works on the topic of equivalence).
Timeline
The regulations establishing the ESRB and the ESAs in 2010 included provisions for the European Commission to regularly review the activities and organisation of the ESAs and the ESRB. A first report was published in 2014; a general review followed in 2017. In connection with this, the European Commission launched a public consultation on the operations of the ESAs in spring 2017 to provide a basis for a legislative initiative. Consequently, on 20 September 2017, the European Commission proposed legislative amendments to the functioning of ESMA and the other ESAs with the aim of more strongly integrating European supervision to foster the Capital Markets Union and financial integration.
On 21 March 2019, the EU Member States and the European Parliament agreed on the core elements for reforming the tasks, supervisory competences, governance structures and financing of the ESAs and the ESRB. These core elements apply from 1 January 2020, while ESMA’s new direct supervisory competences on critical benchmarks and data provision services will take effect from 1 January 2022. The next regular review of the ESA Regulations is already expected for 2022 as well.
European Supervisory Authorities
Other ESFS authorities