Authors Iain Begg | Gabriel Glöckler | Anke Hassel ... - The Europaeum

importantly, the “lead supervisor” regime opens the possibility for
different regulatory practices across jurisdictions, violating the principle
of competitive neutrality unless some central control is established. Thus
the “college” solution is inadequate.
A European System of Financial Supervision (ESFS)
Regulatory fragmentation can be feasibly addressed by a gradual but
speedy transition to a European System of Financial Supervision (ESFS),
parallel to the European System of Central Banks (ESCB). Both the Turner
Review 14 and the de Larosière Group 15 agree on the need to replace the
Level 3 Lamfalussy committees with a new EU independent regulatory
institution. The primary responsibility for supervision of individual firms
would continue to remain at the national level.
Under de Larosière, the ESFS would transform and upgrade the Level 3
Lamfalussy committees into three new independent European Authorities
(for Banking, Securities and Insurance respectively), which would be
granted legal powers on the adoption of binding supervisory standards. 16
After a 2-year transitional period, in which colleges of supervisors would
be set up under ESFS for all major cross-border institutions, the ESFS
would begin to function as a fully fledged integrated independent EU
institution, comprising the three authorities. In late September 2009, the
Commission finally adopted draft legislation incorporating the de
Larosière recommendations; it establishes a European Banking Authority,
a European Insurance and Occupational Pensions Authority, and a
European Securities and Markets Authority.
The boards of the latter would consist of the chairs of the national
supervisory authorities. The three European Authorities would be
equipped with their own autonomous budget. Their chairpersons would
be appointed for an eight-year term, approved by the Commission, the
European Parliament and the Council, and accountable to the EP. Their
competences should include legally binding supervisory standards and
mediation between national supervisors, coordination and oversight of
colleges of supervisors, licensing and supervision of specific EU-wide
institutions such as credit rating agencies, binding cooperation with the
ESRC to ensure adequate macro-prudential supervision, and a coordinating
role in crises.
The ESFS should enjoy institutional guarantees of operational
independence vis-à-vis governments, regulators, and other EU institutions,
thus retaining final authority for interpreting and implementing EU
Chapter 2 – George Pagoulatos 37