Strasbourg round-up: European system of financial supervision (ESFS) review

Written by Wolf Klinz and Jürgen Klute on 12 March 2014 in Special Report
Special Report

The European system of financial supervision deals with the causes of the economic crisis, explain shadow rapporteurs Wolf Klinz and Jürgen Klute

Wolf Klinz is parliament's ALDE group shadow rapporteur on the European system of financial supervision (ESFS) review

With the establishment of the European system of financial supervision (ESFS), Europe has correctly dealt with the causes of the financial crisis. Three years after, it can be stated that its establishment was the right decision. Nevertheless, we should take care not to overshoot the mark. Care should be taken lest the European system of financial supervision does not develop into some kind of politicised super-agency.

A conflict of competences between the European banking authority (EBA) and the European central bank (ECB) that is going to take charge of the banking supervision starting from November 2014 in Europe, has to be avoided at all costs. EBA, as the central rules maker for the EU, has to make sure that different courses of development between the eurozone and non-eurozone members are avoided. Unlimited mediation powers of the EBA, the European securities and markets authority (ESMA) and the European insurance and occupational pensions authority (EIOPA) towards national authorities, or towards the ECB as the banking supervisory authority, are therefore not efficient. Let´s keep in mind that decisions could have possibly a significant fiscal consequence for the taxpayer of the respective member states.


Jürgen Klute is parliament's GUE/NGL group shadow rapporteur on the European system of financial supervision (ESFS) review

Indisputably, the current set of European supervisory bodies is much more capable of preventing further financial crises than the supervision before the financial crisis was. By installing supervision for the financial markets (ESMA, located in Paris), banks (EBA, London), insurances (EIOPA, Frankfurt) and their coordination ESFS, a first step has been made to monitor these markets on a European level and to complement the national supervision.

But it doesn't seem to be the most efficient way to install three different supervisory bodies at three different places in the EU: inefficiencies and a huge effort to coordinate between these institutions don't make things easier. And even the European system of financial supervision, which has been installed to coordinate the three institutions, the European systemic risk board and the national supervisors, can't be the right way to prevent a possible duplication of tasks among the supervisory institutions. And of course, providing the ECB with the power of banking supervision in the EU still enhances the necessity of coordination.

But the European supervision is far from perfect, and not only from an institutional point of view. The staff employed by ESMA, EIOPA and EBA is regarded as being part of the staff employed by the EU. During negotiations on the multiannual financial framework of the EU the member states made sure that the number of EU employees has to be reduced over the next years, meaning that the supervisors have to wait for other institutions to reduce their staff before specialists necessary to monitor the implementation of European legislation like the markets in financial instruments directive (MiFID) could be hired. And, of course, the multiannual financial framework 2014 - 2020 stipulates a cut of the EU budget which also concerns the supervisory bodies. This is becoming more difficult since the institutions are financed by the EU and the member states and regarding their financial situations some member states already announced that they could not afford their contribution.

About the author

Wolf Klinz is parliament's ALDE group shadow rapporteur on the European system of financial supervision (ESFS) review

Jürgen Klute is parliament's GUE/NGL group shadow rapporteur on the European system of financial supervision (ESFS) review

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