Sven Giegold
Spitzenkandidat von Bündnis 90 / Die Grünen für die Europawahl

Sprecher der Europagruppe Grüne
„Kommt, wir bauen das neue Europa!“

Parliament strengthens European financial supervision, sustainable finance and consumer protection

The European Parliament’s Committee on Economic and Monetary Affairs (ECON) today voted on the European Commission’s proposals to reform the European system of financial supervision. The legislative package includes the Regulation of the three European Supervisory Authorities (European Banking Authority, European Insurance and Occupational Pensions Authority and European Securities and Markets Authority), several pieces of financial sector legislation and the Regulation of the ESRB (European Systemic Risk Board). The text adopted with a broad majority in ECON today will serve the Parliament as negotiating position in negotiations with the Council and the EU-Commission on the final legislative text. These negotiations can begin as soon as the Council of Ministers has concluded its discussions and found a general approach. The timetable for the legislative process is tight, because it must be completed before the end of the legislative period in May 2019 in order to avoid a reopening after the European elections.

 

MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group and shadow rapporteur on the files commented:

“The European Parliament is crucially strengthening European financial supervision. The new Executive Board, with independent decision making rights, will substantially increase the ability of the European supervisory authorities to act. This success is core to improving supervisory convergence across the single market. The European watchdogs’ enhanced powers will be accompanied by increased accountability towards the European Parliament. The principles of proportionality and integrity will be clearly anchored in the ESAs’ founding regulations. With this position, the European Parliament paves the way for integrated financial markets to be subjected to enhanced supervision on the European level.

The majority of MEPs today backed proposals from the Greens, the Socialists (S&D) and the Liberals (ALDE) for enhanced consumer protection. Consumers will enjoy better protection on financial markets anywhere in Europe in the future. The duty to create a dedicated information channel for whistleblowers found its way into the three ESAs Regulation thanks to our initiative. Our proposal to allow the ESAs to conduct mystery shopping exercises themselves was rejected. This would have allowed the ESAs to test the actual application of consumer protection rules in everyday business practices of financial institutions.

Together with the Socialists we achieved that for the first time the ESAs get a mandated in monitoring environmental, social and governance risks. This will ensure that such risks will be better incorporated by market participants in the future. Environmental risks will be included in the existing stress tests for banks. The improvements regarding accountability and proportionality were possible due to the strong support by the Christian Democrats.

For financial criminals in Europe times are getting tougher, because the fight against money laundering was added to the scope of action of the ESAs. Most importantly, the EBA will get a leading role for coordinating the information exchange on money laundering between European and national authorities. Thanks to a Green initiative, not only the Board of Supervisors, but also the EBA’s new Executive Board will be able to trigger investigations into money laundering. We hope to strengthen also the rules on anti-money laundering itself in the upcoming trilogues with Council and Commission.

The increased independence of the ESRB as proposed by the Greens and the Christian Democrats failed because of lacking support by Socialists and Liberals. This is regrettable since the ESRB would have benefited from less conflicts of interest between ECB functions in monetary policy and macroeconomic stability.

The Council must finally end its blockade and decide its position on the full legislative package for stronger financial supervision, so the inter-institutional negotiations can be completed before the end of the legislature in May. If we want to prevent another money laundering scandal to happen in the Banking Union, the Council must finally conclude its talks and sit down with the Parliament to fix the loopholes in the European anti-money laundering legislation. The delay of the Council risks to prevent European citizens and companies to benefit from safer financial markets in the near future. All the talk of banking union and capital markets union looks hypocritical when the Council does not want to commit to effective European financial supervision.”

 

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What we have achieved or successfully defended (from a Green perspective):

Consumer protection

  • mandate: contribute to level playing field where consumers have fair access to comparable financial services, products and redress
  • coordinate mystery shopping activities of NCAs
  • product intervention: after renewal after 6 months, ban of products becomes permanent and won’t expire anymore as before
  • better compensation for non-industry members of Stakeholder Groups

Environmental, social and governance factors (ESG)

  • ESAs shall take into account sustainable business models and the integration of environmental, social and governance related factors
  • monitor market developments with respect to ESG risks
  • put in place a monitoring system to assess material environmental, social and governance-related risks, taking into account the COP 21 Paris agreement
  • develop common methodologies for assessing the effect of environmental risks on the financial stability of institutions (stress tests)

Powers of the ESAs

  • More independent reviews of national competent authorities (including staff of other NCAs on rotating basis), including follow-up report regarding compliance with requested measures – core of Commission proposal maintained
  • Reviews of competent authorities also on own initiative or request by EP or Council
  • Breach of Union law: ESAs can initiate arbitration process with NCAs concerned to discuss action necessary to comply with union law
  • Stress tests: ensure comparability and reliability of methods and practices employed by NCAs
  • ESAs can conduct inquiry into particular type of financial institution or product also on consumer protection issues
  • Issue simplified Strategic Supervisory Plans laying down union-wide supervisory objectives and priorities to NCAs
  • Issue time-limited no-action letters
  • obligatory notification between NCAs and of ESAs where services are provided on the basis of the freedom to provide services or the freedom of establishment
  • setting up of collaboration platforms for the cross-border supervision of financial institutions
  • specific coordination function between NCAs in relation to activities with significant cross-border effect
  • ESAs have to put in place dedicated whistleblower channel
  • Anchoring of the principle of proportionality and integrity

Governance of the ESAs

  • SRB as non-voting member in Board of Supervisors
  • Establishment of an Executive Board with relevant decision making powers, even though not all those proposed by the Commission
  • Facilitated decision making of the BoS on decisions prepared by the Executive Board (we wanted overall more autonomous decisions by Executive Board)
  • Executive Board members and Chair can be removed on the initiative of the EP in case of misconduct

Accountability of the ESAs

  • Register of documents including status of accessibility
  • Position taken by EBA in international standard setting bodies to be discussed at BoS
  • Possibility for BoS to suspend voting rights of BoS member when independence has been assessed insufficient

Money laundering

  • Platform for exchange of fitness and propriety information between NCAs (at EBA only)
  • Addition of AML to scope of action
  • Trigger for AML investigation also in the hands of Executive Board
  • Improvement of the interconnection of national registers

Direct supervision by ESMA

  • ESMA approval for limited set of prospectuses (wholesale, nomination > 100000€, asset backed securities and 3rd country prospectuses

ESRB

  • Possibility to issue recommendations to Union institutions and Member States in response to identified risks
  • Maintain votes of two Vice-Chairs of Advisory Scientific Committee in General Board
  • Exclusion of professional secrecy rules for whistleblowers

 

 

What we have lost or could not prevent (from a Green perspective):

Consumer protection

  • Conduct mystery shopping exercises
  • Mandate to collect information related to complaints submitted to NCAs
  • Standards for complaints handling by NCAs
  • Product intervention powers for EIOPA
  • Full alignment of Article 9 EBA/ESMA Regulation with MIFIR

Environmental, social and governance factors (ESG)

  • Mandate to develop methodology for dedicated carbon stress tests

Powers of the ESAs

  • Stronger specifications for whistleblower channel
  • Possibility for individuals to report breaches of union law
  • Possibility for ESAs to report to the Commission where differences in the national transposition or application of Union acts hamper the functioning of the single market or cause detriment for consumers
  • Coordinate stances of NCAs which participate in international standard setting bodies
  • the  fines procedure for information requests directly to financial institutions, proposed by the EC, is effectively watered down, ESAs cannot impose fines or conduct investigations
  • Guidelines and recommendations Q&As are limited to the legal acts mentioned in Article 1 para 2 excluding para 3. Also institutions can establish alternative means of compliance.

Governance of the ESAs

  • Improved selection procedure for Chair and Executive Board members
  • Chair voting rights in the BoS
  • Stakeholders groups ability to oppose guidelines is enhanced

Money Laundering

  • Empower the EBA to monitor the quality and the effective interconnection of national registers for beneficial owners of bank accounts, companies, trusts and real estate

ESRB

  • No independent Chairperson or Managing Director