European supervisory framework

The European Commission began a consultation in mid-March on reforming the framework for the European Supervisory Authorities (ESAs): ESMA (securities and markets), EBA (banks) and EIOPA (insurance).

Given the activities of its membership, AMAFI focused its response on the framework for ESMA, while pointing out that different changes could be considered for each authority depending on the specific needs of the supervised sector (AMAFI / 17-35). AMAFI also said that in view of the importance of the issues under debate, and particularly with Brexit reshaping Europe's financial landscape, it would be advisable to discuss these matters within a high-level expert committee that was given sufficient time to perform a thorough assessment and make proposals commensurate with the challenges.

AMAFI put forward a number of other points to factor into a potential review of ESMA's operating framework:

• Keep a tripartite supervisory architecture with multiple centres, which would rule out merging the ESAs or concentrating cross-sector powers with a single entity.
• Give ESMA the means to ensure effective convergence in national authorities’ supervisory practices, probably by strengthening its toolkit and ensuring that the mechanisms used to verify convergence are truly autonomous (especially peer reviews).
• Convergence must take place only where it is needed, namely where there is a genuine pan-European issue of market structure or competition.
• ESA governance should be reviewed, notably by giving thought to setting up some kind of permanent board-type structure along the lines of the set-up seen in US agencies such as the SEC and CFTC, ensuring that the composition reflects the actual situation of domestic markets in terms of their relative importance.
• At the very least, consideration should be given to extending qualified majority voting in the area of convergence and supervision of practices.
• Give ESMA the power to assess and monitor equivalence agreements with third countries, particularly with a view to the post-Brexit period.
• Improve consultation mechanisms.
• Given the many tasks assigned to ESMA, limit the granting of new powers to what is relevant and truly needed within Europe.

On this last point, AMAFI provided the following feedback on some of the solutions proposed by the Commission:

• Giving ESMA cross-sector supervisory powers to protect consumers or audit and accounting powers would lead to added complexity and would be inappropriate.
• When it comes to supervising central counterparties (CCPs), logic dictates that direct CCP supervision should be entrusted to central banks and banking authorities, and hence, in the case of the euro area, to the European Central Bank and the Single Supervisory Mechanism.
• There would be value in giving ESMA direct supervisory powers over the “critical benchmarks” referred to in the European Benchmark Regulation, given the pan-European nature of these indices.