1. EU Institutional Architecture for Financial Regulation – Constitutional Issues and Solutions
Alexander Türk
Dickson Poon School of Law, Centre of European Law, King’s College London

2. EU Institutional Architecture for Financial Regulation
Level 1: EU Legislation (European Parliament and Council of Ministers)
Level 2: Commission adopts subordinate regulation
Commission adopts delegated acts under Article 290 TFEU and implementing acts under Article 291 TFEU
Commission also adopts formally draft regulatory technical standards (under Article 290 TFEU) and draft implementing technical standards (under Article 291 TFEU) on the basis of drafts adopted by the European Supervisory Authorities (EBA, ESMA, EIOPA)
Level 3: Guidance by ESAs
Level 4: Implementation and application of Union rules by national authorities subject to supervision by Commission and ESAs

3. Regulatory Powers of ESAs
Adoption of draft technical standards
Draft regulatory technical standards
Draft implementing technical standards
Adoption of guidelines and recommendations
Adoption of other regulatory tools (European supervisory handbook, systemic risk tools, peer review, regulation through information management and reporting, methodological tools, warnings, advice, opinions)
Enforcement powers
Enforcement decisions
Emergency decisions
Mediation decisions

4. Constitutional Issues
Principle of conferral
Legal basis constraints (see Case C-270/12, paras )
Prerogative of the Union legislator
Essential elements (see Case C-355/10)
Institutional balance
Meroni constraints (see Case C-270/12, paras )
Relationship ESAs and Articles 290 and 291 TFEU (see Case C-270/12, paras )
Relationship Articles 290 and 291 TFEU (see Case C-427/12)
Democratic legitimacy
Process constraints

5. ESAs and Article 290 TFEU: adoption of regulatory technical standards
Drafting mandate: Article 10(1)(1) of Reg. 1093/2010 (similar for ESMA and EIOPA)
Limitations: Article 10(1)(2) of Reg. 1093/2010
Technical, not implying strategic decisions or policy choices
Procedure
Open public consultations; cost benefit analysis (exception: disproportionate effort)
Opinion of Banking Stakeholder Group
Adoption of DRTS by Board of Supervisors (qualified majority)
EBA submits draft to Commission (Article 10(1) of Reg. 1093/2010)
Submission to Commission (forwarding to CM and EP)
Endorsement process (3 months)
Commission endorses
Commission does not endorse on ground of Union interest (see also Article 14)
EBA adopts formal Opinion for Commission (copy to CM and EP)
Commission adopts its version of standard if no Opinion or inconsistent Opinion

6. ESAs and Article 290 TFEU: adoption of regulatory technical standards
Commission may adopt RTS without draft (Article 10(3) of Reg. 1093/2010)
Open, public consultation, costs benefits (exception)
Opinion of Banking Stakeholder Group
Commission sends draft to CM and EP
Opinion of EBA (with possible amendments)
Commission adopts RTS
Control by EP and CM
Limitation of duration to 4 years with automatic renewal (Article 11(1) of Reg. 1093/2010)
Revocation (Article 12 of Reg. 1093/2010)
Objection (Article 13 of Reg. 1093/2010)
Time-limit: months
Exception: Commission endorses DRTS, then month

7. ESAs and Article 291 TFEU: adoption of implementing technical standards
Drafting mandate: Article 15(1)(1) of Reg. 1093/2010 (similar for ESMA and EIOPA)
Limitations: Article 10(1)(2) of Reg. 1093/2010 (technical, not implying strategic decisions or policy choices)
EBA submits draft (Article 15(1) of Reg. 1093/2010)
Open public consultations; cost benefit analysis (exception: disproportionate effort)
Opinion of Banking Stakeholder Group
Submission to Commission (forwarding to CM and EP)
Endorsement process (3 months)
Commission endorses
Commission does not endorse on ground of Union interest
EBA adopts formal Opinion for Commission (copy to CM and EP)
Commission adopts its version of standard if no Opinion or inconsistent Opinion
Commission may adopt ITS without draft (Article 15(3) of Reg. 1093/2010)
Open, public consultation, costs benefits (exception)
Commission sends draft to CM and EP
Opinion of EBA (with possible amendments)
Commission adopts ITS

8. ESAs and “Soft” Law
Article 16(1) of Reg. 1093/2010 (similar for ESMA and EIOPA)
To establish consistent, sufficient and effective supervisory practices within the ESFS
To ensure common, uniform and consistent application of Union law
Typology (guidelines for improvement of practices, methodology guidelines, benchmark-setting guidelines, implementation/application guidelines, interpretative guidelines)
Effect of guidelines
For competent authorities
Effort to comply (see also Article 6(c) of Directive 2013/36)
in case of non-compliance: reasons
Publication of non-compliance and reasons
For financial institution
Reporting obligation
Inclusion in General Report

9. ESAs and Enforcement Powers
EBA (similar for ESMA and EIOPA)
Infringement Powers (Article 17 of Reg. 1093/2010)
Scope: Non-compliance with Article 1(2) acts (including RTS, ITS)
Initiation of procedure: Upon request (competent authorities, EP, CM, COM, BSG) or own initiative
Investigation
Recommendation to competent authority for compliance with EU lawo
Formal Opinion by Commission to competent authority
Decision by EBA in case of non-compliance with Formal Opinion
Effect: binding on institution and replaces any decision by competent authority
Emergency Powers (Article 18 of Reg. 1093/2010)
Mediation Powers (Article 19 of Reg. 1093/2010)
ESMA: Article 28 of Reg. 236/2012 (discussed in Case C-270/12)

10. Constitutional Concerns
Enhancement of efficiency of the regulation of financial services (expertise argument)
Conferral concerns? Unlikely in light of C-270/12
Essential Elements? Union legislation is quite detailed (no political choices)
Institutional balance concerns?
Concerns about distinction Article 290/291 TFEU? DITS mainly deal with forms and reporting
Meroni concerns: ESAs make policy choices in case of DRTS
Concerns about relationship ESA/Commission
Political prerogative (COM) v efficiency (agency)
Divergence of formal (COM) and actual responsibility (agency)
P: who decides on the Union interest?
Executive polyarchy v institutional integration (elimination of comitology and ‘deliberation’)

11. Constitutional Concerns
Process
Sufficient consultation and participation?
Fragmentation of the Union’s executive
Representation of Union interest?
Political prerogative of the Commission?
Accountability
Conflicts of interests
multiple actors and weak fora