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Patterns of Networked Enforcement in the European System of Financial Supervision: What is the New Role for the National Competent Authorities?

Published online by Cambridge University Press:  24 July 2019


Enforcement of the European System of Financial Supervision (ESFS) has undergone a three-step process over time, leading it to a current networked configuration of powers and tasks between the EU and the national competent authorities (NCAs). In light of this, this paper has a twofold aim. First, it analyses the actual configuration of enforcement mechanisms in the ESFS, arguing that different patterns emerge across the three branches (banks, securities markets and insurance): as governance becomes more complex in terms of number of actors and functions, verticalisation of enforcement increases. Second, by taking into account the three Italian competent authorities, it assesses the concrete changes occurred both in organisation and in perceived effectiveness, through quantitative data and qualitative surveys. It therefore argues that the more institutionalised and verticalised is the enforcement governance, the less reluctant will NCAs be to transfer shares of their enforcing powers to the EU level and to change their practices and organisational structures concretely, according to harmonisation requirements by the European supervisory authorities and the European Central Bank.

Symposium on Institutional Innovations in the Enforcement of EU Law and Policies
© Cambridge University Press 2019 

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22 The ESFS also includes the Joint Committee of the ESAs. ESAs’ founding regulations are, respectively: for EBA, Regulation (EU) no 1093/2010; for EIOPA, Regulation (EU) no 1094/2010; for ESMA, Regulation (EU) no 1095/2010 of the European Parliament and of the Council of 24 November 2010.

23 Scholten, supra, note 6; Scholten et al, supra, note 6.

24 Recital 5 of ESAs’ founding Regulations. ESMA took over supervisory competences on CRAs on 1 July 2011, and since 1 January 2013 on TRs. CESR had already established a dedicated task force in 2010: ESMA, Annual Report 2011 (Paris, European Securities and Markets Authority 2012).

25 Art 23(d) of Regulation (EU) no 513/2011 of the European Parliament and of the Council of 11 May 2011 amending Regulation (EC) no 1060/2009 on credit rating agencies.

26 Regulation (EU) no 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories.

27 EBU involves the Euro-area and the States agreeing to join it.

28 Art 127(6) TFEU, establishing the Single Supervisory Mechanism (SSM), one of EBU’s three pillars.

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31 EIOPA, Annual Report 2016 (Fankfurt: European Insurance and Occupational Pensions Authority 2017) p 81.

32 European Commission, COM(2017) 536 final, 2017/0230 (COD), Brussels, 20/09/2017.

33 European Commission, Reflection paper on the deepening of the Economic and Monetary Union, COM(2017) 291 final, Brussels, 31/05/2017, 20.

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36 Eg the Commission, in October 2012, integrated rules of procedure for the exercise of ESMA’s power to impose fines or periodic penalty payments to CRAs (Commission Delegated Regulation (EU) No 946/2012, of 16 October 2012).

38 The ECB was endowed with a general sanctioning power by Regulation (EC) no 2532/1998.

39 In the EU’s view, CRAs play a crucial role in financial markets, as their credit ratings are used by several market participants (investors, borrowers, issuers, governments) to form investment and financing decisions, so they impact significantly on the operation of financial markets and on the trust and confidence of investors and consumers. Therefore, it was decided to lay down specific rules for them, allowing the introduction of a common regulatory approach to ensure that CRAs are conducted EU-wide based on integrity, transparency and good governance principles: ESMA, ESMA’s Report on the Supervision of Credit Rating Agencies, ESMA/2012/207 (Paris, European Securities and Markets Authority 2012). The choice to entrust the ESAs (and, specifically, the ESMA) with direct supervisory powers towards CRAs was based on the Brussels European Council Presidency conclusions of 18/19 June 2009, 11225/2/09 Rev 2, paras 20–21: see M van Rijsbergen and J Foster, “Rating ESMA’s accountability: ‘AAA’ status” in Scholten and Luchtman, supra, note 6, p 53.

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43 ibid, p 7.

44 Regarding significant banks, the Bank cooperates with the ECB over the whole enforcement cycle: ibid, p 85.

45 They were asked, “Do you think your office and resources are adequate to manage the workload deriving from the current European governance for the enforcement of EU regulation?” and were given the opportunity to choose one of five possible answers: “totally understaffed”; “partially understaffed”; “adequate”; “partially overstaffed”; and “totally overstaffed”.

46 Council Regulation (EU) no 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions, OJ L 287, 29.10.2013, 63–89.

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51 ibid.

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54 Since 2014, the Institute has also carried out onsite inspections for anti-money laundering and counter-terrorist purposes.

55 IVASS, Relazione anno 2015, supra note 52, p 200 (own translation).

56 IVASS, Relazione sull’attività svolta dall’Istituto nell’anno 2016 (Rome, Istituto per la vigilanza sulle assicurazioni 2017) p 202 (own translation).

57 ibid, p 193.

58 Amendment to Legislative decree no 209/2005 (Codice delle assicurazioni private) adding Art 325-quater.

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70 ibid (own translation).

71 CONSOB, Relazione per l’anno 2015 (Rome, Commissione Nazionale per le Società e la Borsa 2016) p 13 Google Scholar. CONSOB argued that the new European approach has a strong impact on the reorganisation of tasks and roles conferred to the NCAs, which, due to the former, would no longer be based only on the national regulation but directly on EU regulations. Moreover, secondary legislation became widely used, according to which the Commission is conferred specific powers to issue regulatory technical and implementing standards. Given the variety of themes involved, ESMA is often entrusted the power to establish its contents, and it usually adopts better regulation tools to improve effectiveness. This would require a contextual update of the national legislative framework at various levels, thus causing overlaps and mutual interferences between primary and secondary norms: ibid.

72 In light of the new policy, in November 2018 ESMA published its first annual report concerning administrative and criminal sanctions issued by NCAs under the Market Abuse Regulation. See <>.

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