Central proposals of the EU Commission for the reform of the European system of financial supervision could fall victim to the red pencil of the Council of Ministers. Today the Austrian Presidency is presenting a paper to the relevant Council working group with proposals for amendments to the Commission draft as a basis for discussion. The paper can be seen as the current state of negotiations in the Council, as the Council Presidency has taken into account feedback from the Member States on previous versions. In all three areas discussed – competences, governance and funding – key Commission proposals were deleted and the status quo was maintained as far as possible. Following the conclusion of the current negotiations on the Commission proposals in the Council of Ministers and the EU Parliament, negotiations on the proposals will begin between the co-legislators and the EU Commission.
MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group and founding ESMA rapporteur, commented:
“The Member States‘ blockade of the revision of European financial supervision is a bitter disappointment for the banking union and the capital markets union. The Council ignores the lack of effectiveness of the current system and places national egoisms above the long overdue strengthening of European financial supervision. The Member States are wasting a great opportunity for improvements in consumer protection, the fight against money laundering and the adaptation of financial markets to environmental risks.
The German Federal Government has joined the blocking of the changes proposed by the Commission, entering into an unholy alliance with countries with lax financial supervision and is thus once again opposing France. Those who, like Germany, stand behind the capital markets union must not block a strong European financial supervision. That is how you jeopardize your own credibility. Because the capital markets union can only succeed with coherent financial supervision.
With the rejection of any strengthening of European decision-making capacity by a new Executive Board, the Council has unfortunately positioned itself against a genuine capital markets union. This strengthening would be urgently needed, since national supervisors have so far regularly been able to obstruct decisions in the European supervisory authorities. Many of the legal competences of EU financial supervisors have therefore hardly been used in practice. The only positive suggestion from the Council with respect to governance is the proposal to make one member of the Management Board responsible for combating money laundering. The strengthening of the Management Board proposed by the Council is a mere fictitious solution because the Board is not to be endowed with the relevant powers that the Commission had proposed for the new Executive Board.
Many of the Commission’s valuable proposals on the tasks and powers of financial supervisors have also fallen victim to the red pencil of the Member States. The Council is missing the opportunity for more supervisory convergence, thereby accepting the permanent fragmentation of EU financial supervision. The Council wants to prevent the ESAs from being able to request information directly from financial institutions in specific situations. The deletion of the Strategic Supervision Plans will prevent national supervisors from incorporating the European perspective more strongly in future. The so-called peer reviews to assess the functioning of national supervisory authorities must not remain under the full control of national supervisors, but need an independent chairmanship of the ESAs to be effective. It is downright irresponsible in times of Brexit to delete extended powers vis-à-vis third countries without substitution, as problems caused by regulatory arbitrage in the EU will increase even further in future.“
Link to the consolidated Council compromise proposal:
Link to member states’ comments: