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EU Institutional Architecture for Financial Regulation – Constitutional Issues and Solutions

EU Institutional Architecture for Financial Regulation – Constitutional Issues and Solutions. Alexander Türk Dickson Poon School of Law, Centre of European Law, King’s College London. EU Institutional Architecture for Financial Regulation.

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EU Institutional Architecture for Financial Regulation – Constitutional Issues and Solutions

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  1. EU Institutional Architecture for Financial Regulation – Constitutional Issues and Solutions

    Alexander Türk Dickson Poon School of Law, Centre of European Law, King’s College London
  2. EU Institutional Architecture for Financial Regulation Level 1: EU Legislation (European Parliament and Council of Ministers) Level 2: Commission adopts subordinate regulation Commission adopts delegated acts under Article 290 TFEU and implementing acts under Article 291 TFEU Commission also adopts formally draft regulatory technical standards (under Article 290 TFEU) and draft implementing technical standards (under Article 291 TFEU) on the basis of drafts adopted by the European Supervisory Authorities (EBA, ESMA, EIOPA) Level 3: Guidance by ESAs Level 4: Implementation and application of Union rules by national authorities subject to supervision by Commission and ESAs
  3. Regulatory Powers of ESAs Adoption of draft technical standards Draft regulatory technical standards Draft implementing technical standards Adoption of guidelines and recommendations Adoption of other regulatory tools (European supervisory handbook, systemic risk tools, peer review, regulation through information management and reporting, methodological tools, warnings, advice, opinions) Enforcement powers Enforcement decisions Emergency decisions Mediation decisions
  4. Constitutional Issues Principle of conferral Legal basis constraints (see Case C-270/12, paras. 97-118) Prerogative of the Union legislator Essential elements (see Case C-355/10) Institutional balance Meroni constraints (see Case C-270/12, paras. 41-55) Relationship ESAs and Articles 290 and 291 TFEU (see Case C-270/12, paras. 77-87) Relationship Articles 290 and 291 TFEU (see Case C-427/12) Democratic legitimacy Process constraints
  5. ESAs and Article 290 TFEU: adoption of regulatory technical standards Drafting mandate: Article 10(1)(1) of Reg. 1093/2010 (similar for ESMA and EIOPA) Limitations: Article 10(1)(2) of Reg. 1093/2010 Technical, not implying strategic decisions or policy choices Procedure Open public consultations; cost benefit analysis (exception: disproportionate effort) Opinion of Banking Stakeholder Group Adoption of DRTS by Board of Supervisors (qualified majority) EBA submits draft to Commission (Article 10(1) of Reg. 1093/2010) Submission to Commission (forwarding to CM and EP) Endorsement process (3 months) Commission endorses Commission does not endorse on ground of Union interest (see also Article 14) EBA adopts formal Opinion for Commission (copy to CM and EP) Commission adopts its version of standard if no Opinion or inconsistent Opinion
  6. ESAs and Article 290 TFEU: adoption of regulatory technical standards Commission may adopt RTS without draft (Article 10(3) of Reg. 1093/2010) Open, public consultation, costs benefits (exception) Opinion of Banking Stakeholder Group Commission sends draft to CM and EP Opinion of EBA (with possible amendments) Commission adopts RTS Control by EP and CM Limitation of duration to 4 years with automatic renewal (Article 11(1) of Reg. 1093/2010) Revocation (Article 12 of Reg. 1093/2010) Objection (Article 13 of Reg. 1093/2010) Time-limit: 3 + 3 months Exception: Commission endorses DRTS, then 1 + 1 month
  7. ESAs and Article 291 TFEU: adoption of implementing technical standards Drafting mandate: Article 15(1)(1) of Reg. 1093/2010 (similar for ESMA and EIOPA) Limitations: Article 10(1)(2) of Reg. 1093/2010 (technical, not implying strategic decisions or policy choices) EBA submits draft (Article 15(1) of Reg. 1093/2010) Open public consultations; cost benefit analysis (exception: disproportionate effort) Opinion of Banking Stakeholder Group Submission to Commission (forwarding to CM and EP) Endorsement process (3 months) Commission endorses Commission does not endorse on ground of Union interest EBA adopts formal Opinion for Commission (copy to CM and EP) Commission adopts its version of standard if no Opinion or inconsistent Opinion Commission may adopt ITS without draft (Article 15(3) of Reg. 1093/2010) Open, public consultation, costs benefits (exception) Opinion of Banking Stakeholder Group Commission sends draft to CM and EP Opinion of EBA (with possible amendments) Commission adopts ITS
  8. ESAs and “Soft” Law Article 16(1) of Reg. 1093/2010 (similar for ESMA and EIOPA) To establish consistent, sufficient and effective supervisory practices within the ESFS To ensure common, uniform and consistent application of Union law Typology (guidelines for improvement of practices, methodology guidelines, benchmark-setting guidelines, implementation/application guidelines, interpretative guidelines) Effect of guidelines For competent authorities Effort to comply (see also Article 6(c) of Directive 2013/36) in case of non-compliance: reasons Publication of non-compliance and reasons For financial institution Reporting obligation Inclusion in General Report
  9. ESAs and Enforcement Powers EBA (similar for ESMA and EIOPA) Infringement Powers (Article 17 of Reg. 1093/2010) Scope: Non-compliance with Article 1(2) acts (including RTS, ITS) Initiation of procedure: Upon request (competent authorities, EP, CM, COM, BSG) or own initiative Investigation Recommendation to competent authority for compliance with EU lawo Formal Opinion by Commission to competent authority Decision by EBA in case of non-compliance with Formal Opinion Effect: binding on institution and replaces any decision by competent authority Emergency Powers (Article 18 of Reg. 1093/2010) Mediation Powers (Article 19 of Reg. 1093/2010) ESMA: Article 28 of Reg. 236/2012 (discussed in Case C-270/12)
  10. Constitutional Concerns Enhancement of efficiency of the regulation of financial services (expertise argument) Conferral concerns? Unlikely in light of C-270/12 Essential Elements? Union legislation is quite detailed (no political choices) Institutional balance concerns? Concerns about distinction Article 290/291 TFEU? DITS mainly deal with forms and reporting Meroni concerns: ESAs make policy choices in case of DRTS Concerns about relationship ESA/Commission Political prerogative (COM) v efficiency (agency) Divergence of formal (COM) and actual responsibility (agency) P: who decides on the Union interest? Executive polyarchy v institutional integration (elimination of comitologyand ‘deliberation’)
  11. Constitutional Concerns Process Sufficient consultation and participation? Fragmentation of the Union’s executive Representation of Union interest? Political prerogative of the Commission? Accountability Conflicts of interests multiple actors and weak fora
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