ABBL

General comments

The Luxembourg Bankers’ Association (the ABBL) welcomes the opportunity to comment the Commission Communication on the European financial supervision dated May 27, 2009.

In line with our previous comments on the Commission Communication of March 4, 2009, we reiterate our support to the reform of the European supervisory architecture, which has received the political approval of the European Council of June 19, 2009.

Our comments focus on the European System of Financial Supervisors (the ESFS), i.e. the role, the responsibilities and the governance of the future European Supervisory Authorities.

Role and responsibilities of the ESFS

Breakdown of responsibilities between the European Supervisory Authorities and the national supervisors

The Commission legislative proposal expected in autumn will have to detail the scope of the ESFS, the responsibilities transferred to the European Supervisory Authorities and those retained by the national supervisors. In that respect, we agree with the breakdown of responsibilities proposed in Annex V of the de Larosière report: “Allocation of competences between national supervisors and the EU Authorities in the ESFS”.

We expect that the legislative package in this area will be composed of two building blocks: the Regulations creating the European Supervisory Authorities, and the amendments to the sectoral Directives delimiting the scope the European Supervisory Authorities’ responsibilities. In order to ensure the consistency of the legislative package and to facilitate the consultation process, we invite the Commission to publish simultaneously the Regulations and the amendments to the sectoral Directives.

Binding technical standards

We agree that the European Supervisory Authorities may issue legally binding technical standards, which we understand as clarifications or implementing measures of existing provisions in the sectoral Directives (CRD, Mifid, etc).

Settlement of disagreements between national supervisors

We welcome the proposal of the Commission. We think that the European Supervisory Authorities are the best placed to settle disagreements between national supervisors. We share the view that this mechanism should be a last resort measure, to be activated when the conciliation initiated by the European Supervisory Authorities has proven to be unsuccessful.

In that respect, the systematic participation of the European Supervisory Authorities in the colleges of supervisors will contribute to the prevention and to the resolution, at the earliest stage, of potential disputes between supervisors.

Manifest breach of Community Law

While we do not question the role of the European Supervisory Authorities in this area, we would appreciate more precision on:

•    The circumstances triggering the intervention of the European Supervisory Authorities;

•    The articulation of the European Supervisory Authorities’ role and the Level 4 of the Lamfalussy framework, whereby the Commission ensures that Member States are complying with applicable legislation and it pursues enforcement action when required.

Ensure a common supervisory culture and consistent supervisory practices

The European Supervisory Authorities will play a key role in building a European supervisory culture based on mutual trust: exchange of staff, common training programmes and systematic participation in the colleges of supervisors are useful tools to achieve this objective.

We think that the European Supervisory Authorities should also monitor and enhance the quality of supervision, for example by detecting and promoting the best practices used by the European and international supervisory community.

Full supervisory powers for some specific entities
 
We agree with the proposal. Some pan-European institutions, like Credit Rating Agencies, are regulated by directly-applicable EU legislation. As a consequence, the European Supervisory Authorities are in a better position to achieve an efficient supervision of such institutions compared to a college of 27 national supervisors.

Ensure a coordinated response in crisis situations

In the absence of any progress on the burden sharing, the European Supervisory Authorities can only play a role of facilitator and coordinator in crisis situations, the definition of which remains unclear.

We have some reservation concerning the introduction of “emergency decisions”. In an emergency situation the European Supervisory Authorities would not issue implementing measures concerning sectoral directives, but would take decision of an operational supervisory nature. Such decisions should not be taken in the absence of mandate received from the Council, and they should not impinge on the Member States’ fiscal policies.

Collect micro-prudential information

We agree with the responsibility granted to the European Supervisory Authorities in this area. The confidentiality of the information collected should be in any case guaranteed.

Undertake an international role

We agree with the principle to give to the EU more visibility and more weight in the international negotiations.

Governance of the ESFS

The governance of the European Supervisory Authorities must be clarified.

These Authorities are technical bodies, which must not be influenced by political considerations. In particular, the voting system should guarantee that decisions are taken in a neutral, effective and quick manner.

A system of Qualified Majority Voting (QMV) as defined in the Treaty, which is primarily based on demographic weights, does not grant such guarantees of neutrality. Such a system encourages influence from alliances that may pollute, through exogenous elements, the technical decisions on the banks’ solvency or liquidity position.

The dissuasion power of a potential European Supervisory Authority’s final decision would be effective for Member States with limited voting weight, but far less for those Member States with a big voting weight.

The QMV system is likely to result in conflicts between European supervisors. Furthermore, it does not fairly reflect the expertise of all supervisors involved.

It is crucial that all Member States stand on an equal footing in the Board of Supervisors of the Authorities (be they big, small, Host or Home countries) in order to avoid political bargaining and to promote trust among the supervisory community.

We propose that the future Authorities adopt the “one member, one vote” principle as a fundamental principle to their decision-making mechanism. Such a principle is especially relevant in the situation where the European Supervisory Authorities have to settle disagreements between supervisors.

It has to be stressed that the “one member one vote” principle is already in use in the Governing Council of the ECB and without any exception in the 22 Community Agencies set up in the first pillar of the EU Treaty framework. The table attached in annex details the voting system of each Community Agency.