EIOPA came into existence on 1 January 2011. It’s one of the three European Supervisory Authorities (ESAs) that form part of the European System of Financial Supervision (ESFS). (The others are the European Securities and Markets Authority, and the European Banking Authority).
Like ESMA and the EBA, EIOPA’s objectives include “upgrading the quality and consistency of national supervision, strengthening oversight of cross-border groups and establishing a European single rulebook …”. (This seems to have come as a surprise to the UK’s Prudential Regulation Authority – see my blog of 28 May 2013.) To enable it to achieve these objectives, EIOPA has been given the power to: (i) draft technical standards for adoption by the European Commission; and (ii) “issue guidelines and recommendations on the Application of Union law”. And it’s already used these powers to make a significant contribution to the development of Omnibus II, Solvency II, IMD 2 and the revised IORP Directive, among others.
Towards the end of each calendar year, EIOPA publishes its work programme for the following year, and 2012 was no exception. Although “EIOPA … decided to reshape the structure of its Work Programme [for 2013, that] has not affected the highly ambitious programme presented for 2013” (the 2013 Work Programme is available here). To deliver a highly ambitious Work Programme, you need a highly ambitious budget and headcount, and EIOPA’s budget and headcount do not disappoint. In 2011, EIOPA’s operating budget was €10.6m and its headcount was 56. The equivalent figures for 2012 and 2013 were: a budget of €15.7m and a headcount of 89; and a budget of €18.8m and a headcount of 114. But that’s not quite enough: “Priorities still have to be made with regards to EIOPA[‘s] mandate, as the Authority will only reach its anticipated size in 2020”.
The mere fact that EIOPA is ambitious is not a surprise. When EIOPA’s chairman, Gabriel Bernardino, speaks, he very often reminds us that EIOPA is fully committed to Solvency II, and that he’s absolutely sure it will be delivered in due course. This is usually followed by an invitation to his European colleagues to begin to develop a global regulatory framework for insurers, which is akin to Basel and based on Solvency II. If we don’t do this, he argues, someone will do it for us, and we’ll regret the missed opportunity. That may be true. But as EIOPA’s critics point out: Solvency II hasn’t been Europe’s finest hour. It may therefore be better for EIOPA to clean up its own back yard, before having a stab at world domination.
The European Regulations which established EIOPA, ESMA and the EBA require the Commission to publish a report by 2 January 2014, which “considers the experience acquired as a result of the operation of the Authorit[ies] and the procedures laid down in [the] Regulation[s]”. The Commission is also required to consider whether it would be appropriate to (i) “continue separate supervision of banking, insurance, occupational pensions, securities and financial markets”; (ii) “undertake prudential supervision and supervise the conduct of business separately or by the same supervisor”; and (iii) “simplify and reinforce the architecture of the ESFS in order to increase coherence between the macro and the micro levels and between the ESAs”. The Commission’s review began with a conference in Brussels on 24 May 2013. Conference delegates heard arguments for and against (i) the status quo; (ii) a “twin peaks” supervisory model like the UK’s; and (iii) the merger of all three ESAs into one authority, that will be based in one location instead of three (EIOPA is in Frankfurt, ESMA is in Paris, and the EBA is in London).
Gabriel Bernardino seems to have taken a different approach: he used his introductory conference statement to call for “evolution, not… revolution”, and argued that we should:
- Strengthen EIOPA’s operational independence by giving it an independent budget line in the General Budget of the European Union, consider giving EIOPA the power to levy fees on the industry, giving it greater budgetary flexibility so that it can continue to attract the highly qualified staff it needs for Solvency II implementation, and giving it a more efficient decision-making process so that it can avoid conflicts of interest with national supervisors;
- Reinforce EIOPA’s independent challenging role towards national supervisors by giving it direct access to individual information, and the power to conduct an inquiry into a particular type of financial institution, product or conduct – a power that should be available generally to support EIOPA’s independent challenging role; and
- Enhance EIOPA’s mandate and powers – for example, EIOPA has the power to ban or restrict financial activities, but it still “needs to be brought to life”. EIOPA “scope of action” should also be extended to include personal pensions, and it should be given a centralised oversight role in the field of internal models.
We probably shouldn’t therefore be too surprised by the flurry of “land grab” headlines that accompanied reports of the conference. Nor should we be surprised if they’re followed by questions about the extent of EIOPA’s ambition, its funding, and its democratic legitimacy. In the meantime, look out. EIOPA may be coming to a yard near you.