EC proposes financial supervisory reforms giving stronger role for EIOPA

The European Commission (EC) has proposed reforms to pave the way for further financial integration, which will improve the mandates, governance and funding of the European Supervisory Authorities (ESAs), including the European Insurance and Occupational Pensions Authority (EIOPA). The EC said the ESAs “are pivotal in ensuring that financial markets across the EU are well regulated, strong and stable”, adding: “However, more needs to be done to enhance regulatory and supervisory convergence within the Single Market to help our financial markets work more effectively and to address new challenges.” In particular, the EC proposals will give EIOPA a stronger role in promoting convergence in the validation of the internal models that some large insurance companies use to calculate requirements on solvency capital. The EC said this will help overcome fragmentation and ensure better supervision of the large cross-border insurance groups. The proposals state that the ESAs will set EU-wide supervisory priorities, check the consistency of the work programmes of individual supervisory authorities with EU priorities and review their implementation. They will also be able to take decisions more independently from national interests. “Under the new governance system, newly-created executive boards with permanent members will lead to quicker, more streamlined and EU-oriented decisions. Moreover, interested parties will be able to ask the Commission to intervene if the majority consider that the ESAs have exceeded their competences when issuing guidelines or recommendations,” said the EC. In terms of funding the ESAs, the reforms will make it independent from national supervisors, guaranteeing that the ESAs have improved autonomy and independence, said the EC, noting that while the EU budget will continue to contribute a share of the ESAs’ funding, the rest will be funded by contributions from the financial sector. Valdis Dombrovskis, vice-president for financial stability, financial services and capital markets union, said: “Financial markets are changing fast. We are seeing renewed cross-border integration, new opportunities in fintech and a boom in sustainable and green finance. The EU needs to act as one player so that we can stay ahead of the curve. More integrated financial supervision will make the Economic and Monetary Union more resilient. These pragmatic proposals will also make it easier for our companies to operate cross-border and build consumer trust.” Insurance Europe welcomed the Commission’s decision to maintain a single, standalone insurance supervisor with appropriate expertise in the form of EIOPA. Michaela Koller, director general of Insurance Europe, said: “To ensure Europe’s insurance industry remains robust and that consumers are adequately protected, insurers need an effective supervisor that recognises their industry’s business model and consumers’ needs.” She added: “Insurance Europe welcomes the fact that EIOPA will continue to oversee both prudential and conduct of business issues for insurers. This is the best way to avoid duplicative and/or contradictory rules being developed by two separate ESAs. However, points that require further analysis are the proposals for material increases in both EIOPA’s scope of activities and the role of the chairperson – in particular, to assess if these would be balanced by appropriate governance and oversight mechanisms.”

EC proposes financial supervisory reforms giving stronger role for EIOPA

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