[author: Kevin Wong]

The European Central Bank (“ECB“) published an opinion (CON/2018/19) (dated April 11, 2018) on a proposed Regulation amending (among other things) the EBA Regulation (Regulation 1093/2010) on April 12, 2018.

The proposed Regulation forms part of the European Commission’s legislative proposals for reforms to the European System of Financial Supervision (“ESFS“), which were published in September 2017. In November 2017, the Council of the EU requested an opinion from the ECB on the proposed Regulation.

In the opinion, the ECB welcomes the proposed Regulation’s objective of fostering effective and consistent prudential supervision and regulation across the EU. It supports further integration of the supervisory framework at EU level for the banking sector and strengthening supervision by re-examining the current set-up of the European supervisory authorities (“ESAs“) (that is, ESMA, EIOPA and the EBA).

The opinion sets out the ECB’s general observation that the banking union and the capital markets union (“CMU“) are at different stages of progress. The review of the ESAs should not necessarily produce three identical outcomes for the three ESAs, but should address their respective mandates and functions.

The ECB considers that certain of the proposed amendments to the EBA Regulation do not adequately distinguish between the scope of the ECB’s microprudential supervisory tasks and the EBA’s competence to set regulatory standards to promote supervisory convergence. It states the importance of avoiding duplication or inappropriate allocation of tasks, as this could blur the responsibilities of the two authorities and render the system less effective overall.

The ECB also makes some specific observations in the opinion concerning the revised EBA governance framework, strategic supervisory plans, stress testing and independent reviews of national competent or supervisory authorities.

A technical working document accompanied by an explanatory text is appended to the opinion, setting out the ECB’s proposed amendments to the text of the proposed Regulation.

The ECB has decided to adopt separate opinions on the Commission’s legislative proposals for reforms to the ESFS, so it advises that the opinion should be read in conjunction with an opinion it published in March 2018 on a proposed Regulation amending the European Systemic Risk Board (ESRB) Regulation (Regulation 1092/2010).