The three European Supervisory Authorities, the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority have each published their 2016 annual reports setting out their objectives, activities and key achievements during the course of 2016.

The Chair’s foreword to the EBA annual report includes the following comments:

“….the Basel Committee is close to finalising the last changes to international standards, aimed at addressing the excessive and unjustified variability in risk weighted assets [RWAs] calculated via banks’ internal models. The EBA has been amongst the first to identify the need for regulatory repair in this area…..We are now close to completing this repair action and keen that the Basel Committee finalises its package addressing the remaining issues that we have not directly tackled. The original proposals contained in the Consultation Paper published by the Basel Committee last year were putting excessive constraints on the use of internal models, driving to an excessive reduction in the risk sensitivity of the regulatory framework and to unwarranted increases in capital requirements. Since then significant adjustments have been made and we are now close to an agreement, although some very sensitive issues, such as the definition and calibration of an output floor, are still being debated.”

“Finally, this is an important year for the EBA also because the European Commission recently initiated a public consultation to evaluate the operations of the three European Supervisory Authorities and to identify areas where their effectiveness and efficiency can be improved. This review is very timely: the UK’s decision to leave the EU calls for a strategic rebooting of the ESAs, which for the EBA will also coincide with the need to relocate to another Member State within the Union. The EBA is not seeking additional powers: the current set up is working well and we should remain focused on the need to ensure the success of the Banking Union and the integrity of the Single Market. Some fine tuning of existing powers might however be considered. For instance, in recent opinions the EBA high-lighted areas in which a better formulation of our responsibilities could be extremely helpful – e.g. in the area of supervisory reporting, in the monitoring of eligible capital instruments and in the conduct of reviews on the implementation of common rules and practices.”

The Chair’s foreword to the ESMA annual report includes the following comments:

“The UK decision to leave the EU is an unprecedented development in the EU’s history, which will have a significant impact on financial markets and ESMA will have a key role to play in helping market participants adjust and prepare. In this respect, our focus is on supervisory convergence, and avoiding regulatory arbitrage, by ensuring that regulatory standards apply consistently to firms wishing to relocate activities to the EU27. We also see a need to rethink the framework for third countries in financial markets legislation including, the need to strengthen supervisory tools and to introduce regular enforcement powers regarding certain third country entities.”

View ESMA publishes 2016 Annual Report, 15 June 2017

View EBA publishes its 2016 Annual Report, 15 June 2017