Stab fin

The European system of financial supervision

Following the recommendations of the High-Level Group chaired by Jacques de Larosière, a European System of Financial Supervision (ESFS) was established on 1 January 2011. This system is organised around two inseparable and complementary pillars, which are the micro- and macro-prudential approaches.

The ESFS is an integrated network of national and EU supervisory authorities that delegates the day-to-day supervisory responsibilities to the national level. More precisely, the ESFS consists of:

  1. The European Systemic Risk Board (ESRB), a new independent body in charge of the macro-prudential supervision of the potential risks arising at European Union level;
  2. Three European Supervisory Authorities (ESAs)- European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA) and European Securities and Markets Authority (ESMA) - established on 1 January 2011. They are responsible for the micro-prudential supervision of the European financial system.
  3. The joint committee of European Supervisory Authorities, whose aim it is to ensure the consistency of the three ESA's activities in cooperation with the ESRB. These authorities must via this joint committee coordinate closely to establish common positions, notably regarding financial conglomerates, for instance.
  4. Competent or supervisory authorities in the Member States.

The creation of a body dedicated to the macro-prudential dimension of supervision is a significant step forward in the reinforcement of European financial supervision, which helps maintain financial stability. This new architecture, implemented at the beginning of 2011, minimises the gaps that the recent crisis revealed in the fragmentation of responsibilities related to financial supervision and systemic risk analysis.

The establishment of the ESRB should help to facilitate the identification of macro-prudential risks and mitigate vulnerabilities via the issuing of clear recommendations that will be implemented by authorities and market operators. The cooperation between the micro- and macro-prudential dimensions is essential to ensure the smooth functioning of the new architecture, on the one hand regarding the exchange of and access to the necessary data and, on the other hand, as regards the follow-up of warnings and recommendations issued by the ESRB.