System Of Financial Supervision Research Articles

Trying or Failing Better Next Time? - The European Legal Framework for Credit Rating Agencies after Its Second Reform

Between 2009 and 2013 the European Union ( Union) introduced a regulatory and supervisory regime for credit rating agencies (CRAs) and reformed it twice. The Union left the path of industry self-regulation triggered by the financial crisis with its first peak in autumn 2008, the collapse of Lehman Brothers. The turmoil brought to the financial markets prevailed upon the Union at the same time to redesign the supervision of the European financial market fundamentally by introducing a new European System of Financial Supervision (ESFS). The Union's approach to financial market regulation has changed radically in the wake of the recent financial market crises. The Union continues to face far-reaching changes on its way to an 'ever closer' capital market with pivotal projects such as the banking union on its agenda. This paper discusses the Union's regulatory approach to the credit rating sector. It introduces critically the various legal acts forming the regulatory and supervisory regime for CRAs in the Union with a particular focus on its second reform. The paper explores whether the Union is on track to adequately address the main dysfunctions of the credit rating sector which remained unresolved: the overreliance on credit ratings, the oligopolistic structure of the credit rating sector, the civil liability of CRAs, the conflicts of interest, sovereign rating and a further enhancement of the quality of credit ratings. The paper argues that the regulatory framework for CRAs after the second reform appears to have only marginally improved thereby limiting its potential to achieve its ambitious goals. The analysis of the sector-specific, regulatory developing lines in the credit rating market as presented in this paper might also be considered to exemplify some of the general legal (- practical) challenges in the realm of European financial market law.

Delegating Harmonization of the Internal Market: the Ruling in Case C-270/12 United Kingdom of Great Britain and Northern Ireland v European Parliament and Council of the European Union (Short Selling Ban), Judgment of 22 January 2014

The European Securities and Markets Authority (ESMA) was established by Regulation No 1095/2010 (the ESMA Regulation) 1 and is part of the European System of Financial Supervision, 2 bestowed, along with the European Banking Authority 3 and the European Insurance and Occupational Pensions Authority 4 (together known as the ESAs), with the supervision of the European Union’s financial system. The United Kingdom (UK) brought an action for annulment 5 of a specific provision of an EU regulation on short selling and certain aspects of credit default swaps. 6 The challenged provision, entitled ‘ESMA intervention powers in exceptional circumstances’, conferred powers on ESMA to intervene in circumstances posing a threat to the orderly functioning and integrity of financial markets or to the stability of the financial system in the Union. Pursuant to the contested provision, ESMA’s powers extended to the imposition on natural and legal persons of notification and disclosure requirements, and the prohibition or limitation on the entry into certain transactions. In a Grand Chamber judgment dismissing the action, the Court delivered an important ruling on the scope of permissible delegation powers within the context of harmonization of the internal market. 7

Interpreting the EBA's powers: a case comment on the EBA's Board of Appeal Decision 2013-008, 24 June 2013

The European Banking Authority (EBA) was introduced within the framework of the European System of Financial Supervision in 2011. It represents an important change in the supervisory structure of banks in the European Union. The scope of conferred powers enabling the Authority to promote supervisory convergence has now been the main issue of a Joint Board of Appeal decision. Developing a comprehensive legal interpretation method, the decision adds legal clarity to the powers and tasks allocated to the EBA.

The role of EIOPA in consumer protection

This article examines the role of the European Insurance and Occupational Pensions Authority (EIOPA) in consumer protection. Being part of the recently created European System of Financial Supervision, EIOPA and the other European Supervisory Authorities have received a consumer protection mandate in their respective specialist financial markets. The article reviews the experience available from the first three years of existence from three perspectives: how the institutional framework influences EIOPA's activity in this field; what type of focus areas the Authority has chosen to realise its consumer protection goals; and what kind of tools are at its disposal to remedy consumer detriment.

INVOLVEMENT OF THE EUROPEAN SYSTEM OF CENTRAL BANKS IN SAFEGUARDING FINANCIAL STABILITY

This paper discusses the development of the role of the European System of Central Banks (ESCB) in safeguarding financial stability. This is extremely important in the circumstances of globalised banking industry and financial market complexity and along the path to a new post-crisis world. The financial crisis forced European policy makers to reshape the institutional architecture of the European Union's (EU) framework of financial sector and market supervision as well as to define responsibilities in macro-prudential policy-making and coordination at the EU level. The European System of Financial Supervision (ESFS) started its activities in 2011. At the same time in 2012, the Council of the EU set out its position on establishing a single supervision mechanism (SSM), conferring supervisory tasks on the European Central Bank (ECB) and modifying the responsibilities of the European Banking Authority (EBA). The EU national central banks (NCBs) play an essential role in the process of safeguarding financial stability, and it will become more complex in the near future. The new institutional architecture is a challenge for NCBs. The analysis of NCBs experience in the ESFS and their involvement in safeguarding financial stability at the national level are a good opportunity for promoting the integrity of the financial system. Following the centralisation of a part of the decision-making process, the effectiveness of the NCBs was questioned. Specific developments in the financial system of each country determine the mode of operation and the place of the NCB in the financial environment. At the same time in the context of financial market globalisation and turbulence, the NCBs are subject to financial risks. The paper pursues the aim to propose solutions for further improvements in safeguarding financial stability as well as the ESCB's operation and policy. In the pursuit of the objectives set, the author has made use of such methods as the statistical analysis of indicators, and the graphic and monographic approach. The author builds her research on the analysis of functions of the ESFS, the ESCB and views of a number of researchers on various aspects of modern central banking and NCB role in the process of safeguarding financial stability. Some differences have been detected for the national system of safeguarding financial stability and the involvement of NCBs in the micro-prudential supervision. The institutional architecture for macro-prudential and micro-prudential supervision becomes more complex and centralised only for the group of EU countries. Therefore there is still room for improving the effectiveness and efficiency of this framework. The findings of the research suggest that there exist inconsistencies between the tasks of the ESFS and the SSM and that the integration process is gaining momentum. The innovative aspect of this paper lies in finding trends for the development of NCBs in the micro-prudential supervision and the SSM and the ESFS. DOI: http://dx.doi.org/10.5755/j01.eis.0.7.4129

Je regulatorní aktivita Evropské unie v reakci na finanční krizi adekvátní směrem k odvětví pojišťovnictví?

ČlĂĄnek pojednĂĄvĂĄ o aktuĂĄlnĂ­m vĂ˝voji a změnĂĄch v regulačnĂ­m přístupu k oblasti finančnĂ­ch trhĹŻ. ZejmĂŠna se zaměřuje na zĂĄvěry procesu identifikace slabĂ˝ch strĂĄnek regulatornĂ­ho prostředĂ­, kterĂĄ v rĂĄmci EvropskĂŠ unie byla provedena tzv. ZprĂĄvou de Larosièrovo skupiny a komentuje provĂĄděnou implementaci v tĂŠto zprĂĄvě obsaĹženĂ˝ch doporučenĂ­. De Larosièrova zprĂĄva identifikovala zĂĄvaĹžnĂŠ nedostatky ve stĂĄvajĂ­cĂ­m systĂŠmu finančnĂ­ regulace v EU. Existuje jednotnĂ˝ trh s přeshraničnĂ­mi sluĹžbami, nicmĂŠně dohled zĹŻstĂĄvĂĄ nejednotnĂ˝ a často nekoordinovanĂ˝. VybudovĂĄnĂ­ silnějĹĄĂ­ finančnĂ­ho sektoru v EU v budoucnosti bude vyĹžadovat vyĹĄĹĄĂ­ konvergenci mezi členskĂ˝mi stĂĄty. Jednou z regulačnĂ­ch reakcĂ­ EU je zřízenĂ­, mimo jinĂ˝ch, EvropskĂŠho orgĂĄnu pro pojiĹĄĹĽovnictvĂ­ a zaměstnaneckĂŠ penzijnĂ­ pojiĹĄtěnĂ­ a EvropskĂŠ rady pro systĂŠmovĂĄ rizika, ovlivňujĂ­cĂ­ i odvětvĂ­ pojiĹĄĹĽovnictvĂ­. Tento člĂĄnek se pokouĹĄĂ­ identifikovat, zda probĂ­hajĂ­cĂ­ změny v ekonomickĂŠm systĂŠmu (globalizace či konsolidace) jsou dostatečnĂ˝mdĹŻvodempro zvýťenĂ­ regulace v odvětvĂ­ pojiĹĄĹĽovnictvĂ­, dĂĄle zohledňuje rizika (včetně systemickĂ˝ch), kterĂ˝m vĹŻbec mohou pojiĹĄĹĽovny čelit. ZĂĄvěrem jsou zmĂ­něny změny provĂĄděnĂŠ s ohledem k individuĂĄlnĂ­ regulaci pojiĹĄĹĽoven a očekĂĄvanĂ˝ vĂ˝voj v regulačnĂ­ch tendencĂ­ch.

Systemaufsicht. Der Europäische Ausschuss für Systemrisiken im Finanzsystem als Ausprägung einer neuen Aufsichtsform

Abstract Systemic Supervision The European Systemic Risk Board as an Example of a Structurally New Type of Supervision In response to the 2007/2008 financial crisis the European system of financial supervision has been substantially reformed. As part of these reforms the “European Systemic Risk Board” (ESRB) has been installed and assigned the task of preventing systemic risks to financial stability in the Union. This marks a fundamental change in the strategy and perspective of financial supervision: So far, supervision of financial markets on the national as well as the European level has almost exclusively been micro-prudential, focusing on individual market participants and the risks caused by them as individual financial institutions. The ESRB, on the contrary, is supposed to provide macro-prudential supervision and oversee the financial system as a whole so as to be able to detect and prevent systemic risks that emerge from the interplay of different actors and components within the system. In this ...

"Regional Economic Integration And National Financial Supervision. A Comparative Study "

The paper analyses the case of some regional economic integration areas in order to find common aspects concerning the organization of national financial supervision. More exactly, starting from the European Union case, where reforming the European financial supervision system is an important topic, as well as the reform of the national supervisory frameworks, we extended the analysis to some other regional economic integration areas (in North America, Asia and Africa). Our research objective is twofold: to look for patterns, if the regional economic integration favours a certain form of national financial supervision and if, correlated with the level of economic integration, there is a preoccupation to create a supra-national supervision system. Our results show that there is no correlation between the level of regional economic integration and the structure of financial supervision.

EU Day-to-Day Supervision or Intervention-based Supervision: Which Way Forward for the European System of Financial Supervision?

The European System of Financial Supervision (ESFS) was established by the EU at the beginning of 2011. Participating in its operation are national authorities and EU bodies (or agencies), which are known as European Supervisory Authorities (ESAs). Under the ESFS, day-to-day supervision remains overwhelmingly a matter for national authorities, but the ESAs are vested with certain intervention powers over national authorities and, exceptionally, over market actors. The aim of this article is to ask questions about the division of labour between the ESAs and the national authorities. Thereby, it seeks to participate in the debate on what ought to be the future direction of the ESFS. Specifically, it seeks to open the debate on whether intervention-based supervision or EU day-to-day supervision should be preferred. Focusing mainly on the European Securities and Markets Authority (as one of the ESAs), the article concludes that intervention-based supervision has prima facie more to offer.

Państwo we współczesnej gospodarce światowej – wybrane zagadnienia

The 2007+ financial crisis and the depression in real sphere of many economies important for the world economy has led to many initiatives directed against the negative effects of the crisis. The state and its institutions played the most important role in anti-crisis actions. At the beginning states concentrated on fiscal and monetary policy measures aiming to help national economic subjects. In other words, the challenges of early 21st century changed common opinion on the position and the importance of the modern state. Quickly, however, it has become clear that such help is not sufficient. The advanced level of international cooperation and interdependence between micro- and macroeconomic subjects have led to the situation in which single states could not take effective action against crisis phenomena that were not only initiated in their economies but also imported. In such conditions we can observe the emergence of new international initiatives such as G20, Financial Stability Council, the new European Financial Supervision System or European instruments for financial stability, including the fiscal pact, which was preliminary agreed on during the December summit of the European Council. All those actions are, unfortunately, designed as short-term and emergency measures. They do not aim for longer time frame. There is no debate on doctrinal foundations of the contemporary global economy. The actions described in this text also fi t into that pattern, as they are only an attempt at addressing the problems and not an initiative which has pre-dated the contemporary crisis phenomena.

Financial Market Supervision in the European Union and Its Impact on Lithuania

Financial sector supervisory bodies are organized in different forms in different countries of the European Union. These “models” range from independent stand-alone supervisory authorities to consolidated (centralized) supervisors responsible for supervising the entire financial sector, including banks, insurance companies and securities firms. The aim of this article is to analyse the new financial market supervision approach in the Republic of Lithuania. Since 1 January 2012 the supervision of the Lithuanian financial market has been centralized. Therefore, the Central Bank of the Republic of Lithuania is the sole supervisory authority that supervises the Lithuanian financial market. The new financial market supervision approach has led to the further amendments. Under the Law on Bank of the Republic of Lithuania (Central Bank); since 1 January 2012 the supervision of the financial market funding partly derives from the fees imposed on regulated entities. The operational independence of the supervisory authority leads to more transparent and professional financial market supervision and unburdens public administration costs. However, as it is mentioned in the article, the global financial crisis has led to the disputes that the supervision of the national financial market as well as the financial market of the European Union should develop a harmonized core set of supervision standards that can be applied throughout the European Union. Therefore, by the de Larosiere report as a basis, the European Commission is attempting to establish a new European financial supervision system. Consequently, the new macro-economic supervision approach will impact the further developments in the Lithuania’s financial market supervision.DOI: http://dx.doi.org/10.5755/j01.ppaa.11.1.1409

EU Day-to-Day Supervision or Intervention-based Supervision: Which Way Forward for the European System of Financial Supervision?

The European System of Financial Supervision (ESFS) was established by the EU at the beginning of 2011. Participating in its operation are national authorities and EU bodies (or agencies), which are known as European Supervisory Authorities (ESAs). Under the ESFS, day-to-day supervision remains overwhelmingly a matter for national authorities, but the ESAs are vested with certain intervention powers over national authorities and, exceptionally, over market actors. The aim of this article is to ask questions about the division of labour between the ESAs and the national authorities. Thereby, it seeks to participate in the debate on what ought to be the future direction of the ESFS. Specifically, it seeks to open the debate on whether intervention-based supervision or EU day-to-day supervision should be preferred. Focusing mainly on the European Securities and Markets Authority (as one of the ESAs), the article concludes that intervention-based supervision has prima facie more to offer.

The System of Financial Supervision in Europe – Origin, Developments and Risk of Overruling

The article depicts the general framework in which the regulatory bodies in financial sector have been operating. After an introductory outline of the financial system and its objectives, the analysis shifts to the framework of the financial business operators and of the regulatory bodies. The market is organised and fragmented in financial conglomerates, where cross activities take place and where potentially it is easier for the regulatory bodies to exercise their control. In this context, the different models of supervision will be scrutinised, together with the attempts, made at European level, to comply with the international standards. The final part is dedicated to the description of global dynamics and to the current situation to overcome the systemic crisis affecting the market. With some –bitter – concluding remarks we will try to prospect possible different solutions to the crisis, solutions that don't necessarily coincide with the actual decisions to reform the system taken at European level.

The European Securities and Markets Authority: Lifting the veil on the allocation of powers

The European Securities and Markets Authority (ESMA) was established in 2011 in the wake of the financial crisis. As one of the European Supervisory Authorities (ESA), it is part of the new European System of Financial Supervision. In order to carry out its tasks, ESMA was allocated an impressive range of powers which it exercises in relation to national competent authorities or market actors, including Credit Rating Agencies. The aim of this article is to examine ESMA's powers and the questions that they raise. As an EU body, ESMA was delegated certain powers. This fact raises some important issues - notably with respect to the Meroni doctrine - which this article investigates. In particular, it argues that EU actors have mostly been tight-lipped over the precise constitutional limitations of a delegation of powers when vesting powers in ESMA. The main message of this article is that the lack of clarity characterizing the current state of affairs is unsatisfactory and should be addressed. PERLIO -

Europe's New Financial Regulatory Bodies

Starting on 1 January 2011, the EU has reorganised its system of financial regulation and supervision by installing several supervisory bodies. The background of these decisions and the main characteristics within the wider institutional and political system of financial supervision, as well as the analysis of their legal powers, deserve attention.

The Game Analysis on Risks of Logistics Enterprises Participate in Logistics Finance

Although the financial crisis is seemly over, but its impact on the global economy is still spreading, and also make people pay more attention to the improvement and operation of the economic and financial system, the development of the logistics industry in this financial crisis has also been confronted with great challenge, in this case, the concept of logistics finance is more widely known by people. While logistics finance provides a good opportunity to the development of logistics industry, it also involves enormous risk. As the financial supervision system is incomplete, enterprise credit evaluation and supervision system is not perfected, risks of the logistics enterprises participate in the logistics finance are more obvious, and researches of this aspect will appear more valuable. Therefore, this paper established a game theory tripartite game model of logistics financial participants, on the base, risks of logistics enterprises participate in the logistics financial business were analyzed, and show the corresponding conclusions and recommendations.

Reforming European financial supervision: adapting EU institutions to market structures

EU policymakers have created a new European System of Financial Supervision, consisting of three European Supervisory Authorities and a European Systemic Risk Board. This article examines some of the legal and institutional issues, including the ESAs’ authority to develop an EU code of financial regulation and to oversee its implementation by Member States and resolve related disputes. The article argues that the creation of the ESAs and ESRB is a proportional response to the increased integration of EU financial markets and the cross-border nature of systemic risk. The article suggests, however, that the ultimate effectiveness of these supervisory reforms will depend on whether they achieve a balance between crisis prevention supervisory measures and crisis management involving the rescue or resolution of financial firms. A better balance needs to be struck to achieve financial stability objectives.

Evropský systém dohledu finančního trhu

Cílem příspěvku není pouze vysvětlit institucionální odpověď na globální finanční krizi, ale také zhodnotit, jak efektivně národní a nadnárodní dohledové úřady využívají svěřené pravomoce. Rozvoj přeshraničně působících finančních skupin zesiluje tlak na vytváření nadnárodních dohledových institucí. Existuje více institucionálních variant, které reflektují vývoj v ekonomickém a finančním prostředí. Pozornost je také věnována harmonizaci regulatorní a dohledové politiky v EU, vyúsťující ve vytvoření Evropského systému dohledu finančního trhu. Nicméně, nadnárodní uspořádání však ještě automaticky nezaručuje efektivní regulaci a dohled přeshraničně působících finančních skupin. Racionálnější struktura institucionálního uspořádání může sice pomoci, avšak efektivnější dohled předpokládá nezávislou a transparentní nadnárodní instituci, vybavenou kvalitními zaměstnanci a vynucovacími pravomocemi, což podporuje rozvoj evropského finančního trhu.

Europe’s New Financial Regulatory Bodies

Starting the 1st of January 2011, the European Union has reorganised its system of financial regulation and supervision by installing several supervisory bodies. The background of these decisions and the main characteristics within the wider institutional and political system of financial supervision deserve attention, as well as the analysis of their legal powers.

EU and U.S. Solutions to Systemic Risk and Their Potential Influence on a World Trade Organization Approach

As the 2008 financial crisis spread globally, it became widely apparent that an essential ingredient to preventing future systemic crises was reform of the regulation of financial markets. Two ambitious initiatives for regulatory reform are the European Union's European System of Financial Supervision and the United States' Dodd-Frank Wall Street Reform and Consumer Protection Act. These two approaches to addressing systemic risk differ greatly in both their specificity and the level of authority they entrust to centralized regulators. They provide distinct models on which a potential global systemic risk regulator could be based – a regulator that could be formed via the World Trade Organization, which has successfully liberalized global trade and has a role in global finance. This paper explores the EU and U.S. systemic risk regulatory models and explains why the EU approach is better suited for adaptation to the WTO.