EU Regulatory Architecture 

EU supervisory framework

A well-functioning internal market for financial services presupposes stringent and efficient rules for all operators coupled with an effective supervisory framework, strong dissuasive sanctions and clear enforcement mechanisms. The interconnectedness of financial markets across Europe makes regulatory co-ordination and co-operation important.

Enhanced regulatory corporation is key to ensure that regulators are properly informed of risks and take appropriate action.

European System of Financial Supervision

The financial crisis has given rise to a number of changes in the European supervisory landscape. The need for a new Financial Supervisory Architecture for Europe was proposed in the De Larosière Report. The Council of the European Union and the European Parliament agreed on the establishment of the European System of Financial Supervision (ESFS) on 22 September 2010.

The ESFS comprises the following:

• The European Systemic Risk Board (ESRB);
• The European Banking Authority (EBA) (Download pdf [1.56 MB] the EU regulation);
• The European Insurance and Occupational Pensions Authority (EIOPA) (Download pdf [1.58 MB] the EU regulation);
• The European Securities and Markets Authority (ESMA) (Download pdf [1.57 MB] the EU regulation);
• The Joint Committee of the European Supervisory Authorities (ESAs). (This ensures cross-sectoral consistency within the ESAs and coordinates their functions in relation to financial conglomerates, consumer financial products, cross-sectoral risks and anti-money laundering);
• The Member State supervisory authorities.

European Supervisory Authorities 

The ESAs are responsible for Micro-prudential Supervision.

• The Authorities work with national supervisory authorities to safeguard financial soundness and protect consumers of financial services.
• They promote strong coordination at European level to foster harmonised rules as well as coherent supervisory practice and enforcement.
• They have defined legal powers and hold the status of Union Bodies.

European Systemic Risk Board

The ESRB is responsible for Macro-prudential Supervision.

• It monitors and assesses potential threats to financial stability that arise from macro-economic developments and from developments within the financial system as a whole.
• It issues early warnings regarding potential system-wide risks and may issue recommendations for action to deal with these risks.
• It cooperates closely with all the other parties to the ESFS where appropriate, providing the ESAs with the information on systemic risks required for the performance of their tasks; and, in particular, in collaboration with the ESAs, developing a common set of quantitative and qualitative indicators (risk dashboard) to identify and measure systemic risk.
• It coordinates its actions with those of international financial organisations, particularly the International Monetary Fund (IMF) and the Financial Stability Board (FSB) as well as the relevant bodies in third countries on matters related to macro-prudential oversight.

Central Bank of Ireland engagement with EU bodies

The Central Bank of Ireland Governor, Patrick Honohan, is a member of the Board of Governors of the European Central Bank (ECB) and a member of the General Board of the ESRB. The Deputy Governor, Matthew Elderfield, is our member of the Board of Supervisors of all three European Supervisory Authorities. In addition, he is a member of the Management Board of EIOPA and is Alternate Chair of the EBA. Central Bank of Ireland staff actively engage with EU bodies, in particular the European Supervisory Authorities through their participation in ESA committees.

In addition to the above authorities the European Commission, Council and Parliament are an integral part of the legislative architecture of Europe.

The European Council sets the EU's overall political direction. It comprises of heads of state or government and the President of the Commission and meets at least every 6 months.

Institutions involved in EU legislation

There are three main institutions involved in EU legislation:

• The European Parliament, which represents the EU’s citizens and is directly elected by them.
• The Council of the European Union, which represents the governments of Member States. The Presidency of the Council is shared by the Member States on a rotating basis. Ireland will hold the Presidency from January until June 2013.
• The European Commission, which represents the interests of the Union as a whole (effectively the EU civil service).

Together, these three institutions produce through the "Ordinary Legislative Procedure" (previously called "co-decision") the policies and laws that apply throughout the EU. In principle, the Commission proposes new laws and the Parliament and Council, following review and eventual amendment, adopt them. Under the supervision of the European Court of Justice the Commission and the Member States implement EU legislation. The Commission also monitors implementation by Member States.