The 2008 financial crisis exposed important failures in EU financial supervision. In 2011 a new European system was set up for the supervision of the financial sector. The European System of Financial Supervision (ESFS) is made up of 3 European supervisory authorities (ESA):
- The European Banking Authority
- The European Securities and Markets Authority
- The European Insurance and Occupational Pensions Authority
In cooperation and coordination with national supervisory authorities, the ESAs are in place to ensure that rules are applied in a rigorous and consistent fashion throughout the EU, to monitor developments within the financial system and to detect potential risks to financial stability.
The ESFS also comprises the European Systemic Risk Board as well as the Joint Committee of the European Supervisory Authorities and the national supervisory authorities.
European Banking Authority
The role of the European Banking Authority (EBA) is to ensure effective and consistent prudential regulation and supervision across the European banking sector. Its overall objective is to safeguard the integrity, efficiency and orderly functioning of the banking sector.
The EBA contributes to the Single Rulebook in banking whose objective is to provide a single set of harmonised prudential rules for financial institutions throughout the EU. The Authority also plays a role in promoting convergence of supervisory practices and assesses risks and vulnerabilities in the EU banking sector.
European Securities and Markets Authority
The European Securities and Markets Authority (ESMA) is responsible for the integrity, transparency, efficiency and orderly functioning of securities markets, as well as for improving investor protection. It contributes to the Single Rrulebook for EU financial markets and encourages supervisory convergence amongst securities regulators and across financial sectors by working closely with the other European supervisory authorities.
European Insurance and Occupational Pensions Authority
The European Insurance and Occupational Pensions Authority (EIOPA) is responsible for supporting the transparency of markets and financial products and for fostering the protection of policyholders, pension scheme members and beneficiaries in the area of insurance and occupational pensions. It monitors and identifies trends, potential risks and vulnerabilities across borders and across sectors. It also contributes to the Single Rulebook for insurance and pensions, and towards the convergence of supervisory procedures and approaches throughout the EU.
European Systemic Risk Board
The European Systemic Risk Board (ESRB) is responsible for the macro-prudential oversight of the financial system in the EU. One of its main objectives is to prevent and mitigate systemic risks. If it identifies such risks it can issue warnings and recommend measures to be taken.
Joint Committee of the European Supervisory Authorities
The Joint Committee of the European Supervisory Authorities is a forum for cooperation between the 3 European supervisory authorities. Through the Joint Committee, they cooperate regularly and closely and ensure consistency in their practices.
In addition to being a forum for cooperation, the Joint Committee also plays an important role in the exchange of information with the European Systemic Risk Board (ESRB) and in developing the relationship between the ESRB and the European supervisory authorities.
Further information is available on the European Commission’s website.