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European System of Financial Supervision

European System of Financial Supervision (EFSF)

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

Deutsche Börse Group recognises the progress made in the EU regarding financial markets regulation and supervision in the last decade. As an integrated provider of financial services, the 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 is impacted along its entire value chain by the ESAs’ work and it faces a wide range of different supervisors across the EU – since European FMIs operate within a diverse supervisory framework. With relevant EU files being in the process of implementation and the European capital markets set to be further harmonised through projects like the Capital Markets Union, the issue of supervision remains an important topic.

European Supervisory Authorities

European Securities and Markets Authority (ESMA)

The European Securities and Markets Authority (ESMA), based in Paris, covers securities markets and market participants. It contributes to safeguarding the stability of the EU’s financial system by enhancing the protection of investors and promoting stable and orderly financial markets. This is achieved by assessing risks to investors, markets and financial stability, completing a single rulebook for EU financial markets, promoting supervisory convergence and being responsible for the registration and supervision of credit rating agencies and trade repositories. Like all ESAs, ESMA is responsible for micro-prudential supervision at EU level.

European Banking Authority (EBA)

The European Banking Authority’s (EBA) scope includes credit institutions, financial conglomerates, investment firms and payment institutions. Like all ESAs, the EBA is responsible for micro-prudential supervision at EU level. Currently located in London, its various tasks relate to:

  • Ensuring sound, effective and consistent regulation and supervision
  • Contributing to the stability and effectiveness of the financial system
  • Preventing regulatory arbitrage
  • Ensuring an equal level of supervision
  • Promoting consumer protection
  • Strengthening international supervisory coordination
  • Appropriate regulation of supervision of credit institutions

As the United Kingdom has notified the European Council of its intention to leave the EU under Article 50 of the Treaty on European Union, it will be necessary to move the agency to another location within the EU’s territory.

European Insurance and Occupational Pensions Authority (EIOPA)

The European Insurance and Occupational Pensions Authority (EIOPA) is located in Frankfurt/Main. Its core responsibilities include supporting the stability of the financial system, the transparency of markets and financial products as well as protecting policyholders, pension scheme members and beneficiaries. Like all ESAs, the EIOPA is responsible for micro-prudential supervision at EU level.


Other ESFS authorities

European Systemic Risk Board (ESRB)

The European Systemic Risk Board (ESRB), based in Frankfurt/Main, is responsible for the macro-prudential oversight of the EU financial system and the prevention and mitigation of systemic risk. The ESRB therefore has a broad remit, covering banks, insurers, asset managers, shadow banks, financial market infrastructures and other financial institutions and markets. It is part of the European Central Bank.

Competent national supervisory authorities

The respective competent national supervisory authorities of the EU Member States are also part of the ESFS. According to the various legislative measures in the financial services field, each Member State designates its own competent authority or authorities. The competent national supervisory authorities, e.g. the German Bundesanstalt für Finanzdienstleistungsaufsicht or BaFin, conduct day-to-day supervision at the national level. They are represented in the ESAs.



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 creates 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).

Time line

The regulations establishing the ESRB and the ESAs in 2010 included provisions for the European Commission to publish a general report on the operation of the ESAs and the ESFS as a whole, and a review of the mission and organisation of the ESRB. A first report was published in 2014; a general review has been scheduled for 2017. In connection with this, the European Commission launched a public consultation on the operations of the ESAs on 21 March 2017 to provide a basis for concrete and coherent action by way of a legislative initiative; the consultation was open for responses until 16 May 2017.

In its mid-term action plan, the European Commission defined the overall aim to strengthen EU capital markets under the umbrella of the Capital Markets Union. Supervision is one of the priority action topics.

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.

ESFS: the highlighted parts of the value chain are affected

European Commission: Review of the ESFS

The EU Commission adopted a package of proposals to strengthen the ESFS (European System of Financial Supervision) on 20 September 2017. It aims to improve the mandates, governance and funding of the three ESAs (European Supervisory Authority) and the functioning of the ESRB (European Systemic Risk Board) in order to ensure stronger and more integrated financial supervision across the EU.

Overview: tasks of the ESAs within the ESFS

How ESAs promote the enduring stability and effectiveness of the EU financial system [.PDF].