Institutions I [EU]

Table of Contents

European Banking Authority (EBA)

Regulation (EU) No 1093/2010 establishing the European Banking Authority

It sets up the EU agency which works to ensure effective and consistent prudential regulation and supervision across the European banking sector. The agency’s overall objectives are to maintain financial stability in the EU and to safeguard the integrity, efficiency and orderly functioning of the banking sector.

Consistent application of EU law

The European Banking Authority (EBA):

draws up regulatory technical standards to specify the banking legislation to be adopted by the European Commission, where the Council and the European Parliament delegate this power to the Commission;
has the power to issue guidelines and recommendations on the application of EU legislation.

Stress tests

The EBA has a prominent role in the EU-wide stress test exercise that examines banks’ resilience with regard to adverse market developments, and any systemic risks in the EU financial system.

It initiates and coordinates stress tests in the EU with the national authorities responsible for supervising banks.
In cooperation with the European Systemic Risk Board (ESRB), the European Central Bank (ECB) and the Commission, the EBA defines a common methodology for each edition of the stress test.
It also monitors and assesses market and credit trends.

Breach of EU law

The EBA has the power to investigate the alleged incorrect application by a national supervisor of EU banking and financial legislation (in particular when it fails to ensure that a bank complies with the requirements laid down in that legislation).
The EBA may address a recommendation to the particular national supervisor. If the supervisor does not comply with this, the Commission can then be empowered to issue a formal opinion taking into account the EBA’s recommendation.

If a national supervisor persists in not complying with the law, the EBA can adopt decisions directly addressed to the bank. This power can only be used in exceptional circumstances.

European financial supervision

The EBA is part of the European system of financial supervision created in 2010, which, in addition to the ESRB, comprises 2 other supervisory organisations:

the supervisory authority in charge of the insurance and pension sector, based in Frankfurt am Main (European Insurance and Occupational Pensions Authority — EIOPA);
the supervisory authority in charge of the financial markets, based in Paris (European Securities and Markets Authority — ESMA).

Payment services

Directive (EU) 2015/2366 introduced revised rules for payment services in the EU. It strengthens the role of the EBA and requires it to issue guidelines and draft regulatory technical standards in various fields, for example to clarify the rules on ‘passporting’ for payment institutions operating in several EU countries, or to ensure the establishment of adequate security requirements.

Headquarters

Under Regulation (EU) 2018/1717, in the context of the United Kingdom’s intention to withdraw from the EU, the seat of the EBA was relocated from London to Paris as of 30 March 2019.

Application & Background

It has applied since 1 January 2011.

For more information, see:

European Banking Authority (European Banking Authority).

MAIN DOCUMENT

Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC (OJ L 331, 15.12.2010, pp. 12-47)

Successive amendments to Regulation (EU) No 1093/2010 have been incorporated into the original document. This consolidated version is of documentary value only.

European Systemic Risk Board

In the aftermath of the 2008 global financial crisis, the European Union introduced legislation to strengthen EU arrangements for the supervision of the financial sector. These were designed to restore confidence in the financial system and to prevent any risks that might destabilise the global financial system.

It establishes the European Systemic Risk Board (ESRB) as part of the new European System of Financial Supervision (ESFS), which also includes:

— the European Banking Authority;
— the European Insurance and Occupational Pensions Authority;
— the European Securities and Markets Authority;
— the Joint Committee of European Supervisory Authorities;
— the supervisory authorities in the EU countries.
The new supervisory architecture also includes a regulation that gives the European Central Bank (ECB) certain specific tasks to support the ESRB.

Mandate, objectives and tasks

The ESRB is based in Frankfurt am Main (Germany). It is responsible for monitoring and analysing risk in the financial system as a whole (also known as macro-prudential oversight). To achieve this, the ESRB in particular:

— identifies systemic risks and classifies them according to their priority;
— issues warnings where systemic risks are deemed to be significant and makes them public if necessary;
— recommends remedial action in response to risks identified;
— can transmit a confidential warning and assessment to the Council when it considers that an emergency situation is likely to occur;
— monitors the measures taken in response to warnings and recommendations;
— coordinates with international financial organisations like the International Monetary Fund and the Financial Stability Board (FSB).

Organisation

The ESRB has the following structure:

— a General Board that ensures the performance of tasks by taking the necessary decisions;
— a Steering Committee which assists in the decision-making process;
— a Secretariat responsible for day-to-day business and providing support;
— an Advisory Scientific Committee and an Advisory Technical Committee to provide advice and assistance.

The ESRB has a chair who represents the ESRB externally and two vice-chairs. The ECB provides analytical, statistical, logistical and administrative support to the ESRB by running the ESRB’s Secretariat.

Warnings and recommendations

In the event of significant systemic risks to its objective, the ESRB provides warnings and, where appropriate, issues recommendations for remedial action, including legislative initiatives. These warnings or recommendations are addressed in particular to:

— the EU as a whole;
— 1 or more EU countries;
— 1 or more European supervisory authorities;
— 1 or more national supervisory authorities; or
— the European Commission in respect of relevant EU legislation.

Addressees of recommendations must comply or provide an explanation for any inaction. If the ESRB decides that its recommendation has not been followed or that addressees have not provided adequate justification for their inaction, it confidentially informs the addressees, the Council and, where relevant, the European supervisory authority concerned.

The further evolution of the European surveillance system

As the financial crisis evolved and following the worsening sovereign debt crisis in the euro area in 2010-2011, the further integration of the euro area banking systems became necessary. This is why, based on the Commission’s roadmap for setting up a banking union, the European institutions created the following.

— A Single Supervisory Mechanism (SSM), placing the ECB as the central supervisor for euro area banks (around 6,000 banks). Non-euro area countries may also decide to join.
— A Single Resolution Mechanism (SRM), the objective of which is to ensure the orderly resolution of failing banks covered by the SSM without using taxpayers’ money.

Application & Background

From 16 December 2010.

BACKGROUND

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Banking and finance
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Financial supervision
—

Establishment of the ESRB
ACT

Regulation (EU) No 1092/2010 of the European Parliament and of the Council of 24 November 2010 on European Union macro-prudential oversight of the financial system and establishing a European Systemic Risk Board

REFERENCE

Act

Entry into force

Deadline for transposition in the Member States

Official Journal

Regulation (EU) No 1092/2010

16.12.2010

–

OJ L 331, 15.12.2010, pp. 1-11

RELATED ACTS

Directive 2010/78/EU of the European Parliament and of the Council of 24 November 2010 amending Directives 98/26/EC, 2002/87/EC, 2003/6/EC, 2003/41/EC, 2003/71/EC, 2004/39/EC, 2004/109/EC, 2005/60/EC, 2006/48/EC, 2006/49/EC and 2009/65/EC in respect of the powers of the European Supervisory Authority (European Banking Authority), the European Supervisory Authority (European Insurance and Occupational Pensions Authority) and the European Supervisory Authority (European Securities and Markets Authority) (OJ L 331, 15.12.2010, pp. 120-161). See consolidated version

Institutions I [EU]

European Banking Authority (EBA)

Consistent application of EU law

Stress tests

Breach of EU law

European financial supervision

Payment services

Headquarters

Application & Background

MAIN DOCUMENT

European Systemic Risk Board

Mandate, objectives and tasks

Organisation

Warnings and recommendations

Application & Background

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