Chapter 35 - Financial Supervision in the EU

Abstract

The new European financial supervisory framework started at the beginning of 2011. Three new European Supervisory Authorities (the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority) are created to strengthen financial supervision at the EU level. These new European Supervisory Authorities (ESAs) have to work in tandem with the national financial supervisors, who remain responsible for day-to-day financial supervision. While the new European framework is still based on the sectoral model, several EU Member States are adopting the twin peaks model (with two separate supervisors for micro-prudential supervision and conduct of business) or the integrated model (with one single supervisor) in response to the cross-sector developments of financial markets and institutions. To foster financial stability, the new ESAs participate in the newly established European Systemic Risk Board at the ECB. This new body is responsible for macro-prudential supervision at the EU level.