1. 1 1 European Central Bank Frankfurt, 21 September 2009 The new European supervisory architecture

2. 2 2 The new EU supervisory architecture The new EU supervisory architecture is based on two pillars: Main objectives: ESRB Macro- Prudential ESFS Micro- Prudential all financial sectors markets banks insurance Macro: enhanced oversight of systemic risk Micro: enhanced supervisory convergence and coordination

3. 3 3 Micro prudential supervision Main changes –Level 3 Committees (CEBS, CESR and CEIOPS) will become European Supervisory Authorities (ESAs) EBAEIOPAESMA with the following tasks: -binding harmonised technical standards -binding decision-making powers (e.g. mediation) -responsibility for supervision of entities with pan-European reach (CRAs, CCPs) –National supervisors remain responsible for the day-to-day supervision of financial institutions and form with the ESAs the European System of Financial Supervision (ESFS)

4. 4 4 Micro prudential supervision Main value added of the ESFS Ensuring a single set of harmonised rules through binding (and also non-binding) technical standards (single EU supervisory rulebook) Ensuring consistent application of Community rules (also through decisions addressed to financial institutions prevailing over decisions by national authorities) Settlement of disagreement between supervisory authorities Establishment of a central EU supervisory database, maintained by the ESAs (to be used for supervisory peer analysis in the supervisory colleges and also for the purposes of the ESRB, subject to confidentiality agreements)

5. 5 5 Main changes - Establishment of the ESRB as a new EU body without legal personality with tasks of monitoring risks to EU financial stability and issuing risk warnings and policy recommendations - ESRB will include voting (ECB General Council, Chairs of the ESAs, European Commission) and non-voting (EFC President, one national supervisory authority for each Member State) members - The Chair will be elected among the members of the General Council and a Steering Committee will help setting the agenda and preparing the decisions - R ecommendations can cover the EU as a whole or a set of or individual countries - The ESRB will be accountable to European institutions (COM, Council, EP) - The ECB is expected to provide the analytical, statistical, administrative and logistic support to the ESRB Macro prudential supervision

6. 6 6 Main value added of the ESRB Overcomes the current lack of integrated financial stability assessment at EU level covering the whole financial sector (currently an aggregation of various assessments in the EFC) Enhances the quality of the financial stability assessment at the EU level Translates financial stability assessments into risk warnings and policy recommendations for EU and national authorities Exploits at the EU level the central banking analytical capabilities and expertise in financial stability and other areas

7. 7 7  Institutional issues  Composition of the Board and the Steering Committee  Role of the ECB  Relationship with the EFC and the EP  Information gathering  Exchange of supervisory information between the ESRB and the national supervisory authorities through the ESAs  Recommendations  Scope of recommendations is vague: they should not address monetary policy and individual financial institutions; they are likely to cover mainly financial regulation/supervision and can target individual countries  Recommendations are not binding: comply or explain mechanisms and possibility of publishing them as last resort  International dimension  Interplay with IMF and FSB Some open issues for the ESRB 7

8. 8 8 ECB role in supporting the ESRB Collection of information: the ECB/ESCB would gather all the relevant information for the ESRB on the basis of the existing statistical infrastructure and through the exchange of information with the ESAs Tools and methodologies: the ECB/ESCB would provide the analytical tools and methodologies developed in relation to financial stability tasks and other central banking functions Risk monitoring and assessment: the ECB/ESCB would contribute to the EU-wide identification and monitoring of risks to financial stability. Other supporting tasks: the ECB would provide the logistic and administrative support to the day-to-day functioning of the ESRB The ESRB will also be supported by an Advisory Technical Committee comprising representatives of EU central banks and supervisors