The European Commission announced on 23 September 2009 the adoption of legislative proposals to strengthen financial supervision in Europe in the wake of the global financial crisis.

The proposed legislation creates a new European Systemic Risk Board (ESRB) to detect risks to the financial system as a whole (known as "macro-prudential supervision") with a critical function to issue early risk warnings. The legislation will also create a European System of Financial Supervisors (ESFS) for the supervision of individual financial institutions (known as "micro-prudential supervision"). The ESFS will be composed of national supervisors and three new European Supervisory Authorities (ESAs) for the banking, securities and insurance and occupational pensions sectors.

The three new ESAs will be created by converting the existing committees for the banking, securities and insurance and occupational pensions sectors (that is, CEBS, CESR and CEIOPS). There will be a European Banking Authority (EBA), a European Insurance and Occupational Pensions Authority (EIOPA) and a European Securities and Markets Authority (ESMA).

The new ESAs will take over the functions currently exercised by the existing committees as well as additional responsibilities including:

  • developing proposals for technical standards;
  • resolving cases of disagreement between national supervisors, where legislation requires them to co-operate or to agree;
  • taking up a coordinator role in emergency situations; and
  • contributing to ensuring consistent application of technical Community rules.

The Commission's press release can be found here.

Click here for a previous blog on the European Commission's initial proposal.