The European Supervisory Authorities (ESAs) published individual reports on the supervisory independence of competent authorities in their respective sectors. Based on the self-assessment of competent authorities, the three reports highlight that the independence of competent authorities is multi-faceted and dependent on a number of legal, institutional, operational, and cultural factors. The three reports take stock of the competent authorities’ independence along the key areas of operational, financial, and personal independence as well as accountability and transparency. The reports seek to factually represent the arrangements and practices reported by competent authorities, without assessing the independence of individual competent authorities.
The reports set out the following key findings with respect to each area:
- Operational independence. While the vast majority of competent authorities are established as independent bodies, a few are established under the aegis of a ministry and a limited number are required to reply to requests made by certain public bodies, such as Ministers. Not all competent authorities report being in a position to hire staff at the level needed for the fulfilment of their supervisory tasks.
- Financial independence. Almost all competent authorities reported adequate funding. However, a variety of funding models are in operation, with some being subject to centralized government budget rules and a few allowing for the creation of reserves.
- Personal independence. While a framework is in place at most competent authorities, there are differences on aspects such as terms of office and removal conditions for competent authorities’ senior management and board members, management of conflicts of interest, cooling-off periods, and legal protection for staff.
- Transparency and accountability. Competent authorities typically ensure public transparency through the publication of documents such as annual reports or financial statements, disclosing supervisory measures taken, and through duties to report periodically on their activities to a government entity or democratic assembly. Some publish documents in English as a way to enhance transparency.
EBA will use these findings to consider, together with ESMA and EIOPA, how to further develop the monitoring and fostering of supervisory independence. Potential activities might include monitoring supervisory independence through periodic surveys, monitoring conflicts of interest, establishing common EU-wide criteria for supervisory independence, benchmarking/assessment of supervisory independence, and advice on legislative change. The reports can support competent authorities in assessing whether it might be desirable to seek any legislative or regulatory amendment to further improve the framework underpinning their independence. In addition, the reports may be used by the European Commission as input for its own report on the independence of competent authorities, which it is preparing under the review clauses of the ESAs founding regulations.
Keywords: Europe, EU, Banking, Insurance, Securities, Competent Authorities, Supervisory Independence, EBA, EIOPA, ESMA, EC, ESAs
Previous ArticleCBIRC and PBC Publish Regulations for Systemically Important Banks
APRA issued a letter on the loss-absorbing capacity (LAC) requirements for domestic systemically important banks (D-SIBs) and published a discussion paper, along with the proposed the prudential standards on financial contingency planning (CPS 190) and resolution planning (CPS 900).
The European Commission (EC) launched a call for evidence, until March 18, 2022, as part of a comprehensive review of the macro-prudential rules for the banking sector under the Capital Requirements Regulation (CRR) and Directive (CRD IV).
The Financial Stability Board (FSB) published a report that sets out good practices for crisis management groups.
The Australian Prudential Regulation Authority (APRA) found that Heritage Bank Limited had incorrectly reported capital because of weaknesses in operational risk and compliance frameworks, although the bank did not breach minimum prudential capital ratios at any point and remains well-capitalized.
The Office of the Superintendent of Financial Institutions (OSFI) released the annual report for 2020-2021.
Through a letter addressed to the banking sector entities, the Office of the Superintendent of Financial Institutions (OSFI) announced deferral of the domestic implementation of the final Basel III reforms from the first to the second quarter of 2023.
EIOPA recently published a letter in which EC is informing the European Parliament and Council that it could not adopt the set of draft regulatory technical standards for disclosures under the Sustainable Finance Disclosure Regulation (SFDR) within the stipulated three-month period, given their length and technical detail.
The Financial Conduct Authority (FCA) published the third in a series of policy statements that set out rules to introduce the UK Investment Firm Prudential Regime (IFPR), which will take effect on January 01, 2022.
The Australian Prudential Regulation Authority (APRA) published, along with a summary of its response to the consultation feedback, an information paper that summarizes the finalized capital framework that is in line with the internationally agreed Basel III requirements for banks.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) issued a consultative report focusing on access to central counterparty (CCP) clearing and client-position portability.