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Review of the Lamfalussy process
With a view to strengthening the Lamfalussy process, the Commission presents practical improvements to encourage deeper cooperation regarding supervision and greater consistency in national implementation and enforcement. In this context, in particular the role and impact of the committees of regulators should be strengthened.
Communication from the Commission of 20 November 2007 entitled "Review of the Lamfalussy process – Strengthening supervisory convergence" [COM(2007) 727 final – Official Journal C 55 of 28.2.2008]
The Lamfalussy process was launched in 2001 for the purpose of strengthening the European regulatory and financial sector supervision framework. It consists of four levels. It starts with the adoption of the framework legislation (Level 1) and detailed implementing measures (Level 2). For the technical preparation of the implementing measures, the Commission is advised by committees, made up of representatives of national supervisory bodies, which exist in three sectors: banking, insurance and occupational pensions, and the securities markets. These committees then contribute to the consistent implementation of Community directives in the Member States, ensuring effective cooperation between the supervisory authorities and convergence of their practices (Level 3). Finally, the Commission enforces the timely and correct transposition of EU legislation into national law (Level 4).
Based on the review of this process, the Commission proposes practical improvements to strengthen the Community supervisory framework, especially during periods of market instability.
The evaluation of the Lamfalussy process is positive on the whole. However, despite undeniable contributions (flexible regulatory system, convergence, cooperation, etc.), there is a need for certain improvements.
Improvements in the legislative process and enforcement
Experience with the adoption of framework legislation and implementing measures has generally been positive, with only a few adjustments necessary between institutions with regard to supervision and implementation.
The evaluation of the schedules for the sequencing of the measures for the adoption of legislation and implementation (Levels 1 and 2) proves to be complicated as the deadlines are so variable. Consequently, it is difficult to set reasonable deadlines for both transposition and application. To resolve this, the transposition deadline for the whole legislative package could be linked to the adoption of the last implementing measures identified in Level 1. Work on the Level 1 and Level 2 measures could also be carried out more in parallel for greater coherence and facility.
The Lamfalussy process has enabled sound regulatory principles to be introduced and applied. In particular it has led to improved quality of legislation and enhanced transparency and predictability of European Union (EU) policy-making. However, Member States must refrain from adding further national rules ("gold-plating"). For greater transparency regarding consultation, the systematic publication of contributions should also become general practice. Finally, impact assessment should be extended to all significant implementing measures.
In order to increase transparency regarding transposition, the impact of the various disclosure instruments put in place (under the Capital Requirements Directive, etc.) should be strengthened. The Commission publishes regular statistics on the state of play of transposition by Member States, especially concerning Level 1 and Level 2 directives. For their part, Member States should provide the Commission with transposition tables. In the case of late implementation, infringement proceedings will be launched under Article 226 of the EC Treaty.
Supervisory cooperation and convergence
Supervisory cooperation and convergence are one of the innovations of the process, but have not always had the expected effects.
Strengthening the Level 3 Committees [or committees of regulators] is essential. As regards political accountability, an overall two-step approach (political guidance from the European Parliament, the Council and the Commission and committee reports) should enable them to deliver more results. In addition, the mission of the national supervisors is to be extended to include a cooperation and convergence requirement at European level. As regards the legal status of Level 3 Committees, changes to the legal framework will be considered concerning the decisions setting them up and the definition of their role.
Reducing the practical obstacles at European and national levels would strengthen mutual trust and the implementation of the measures. Decision-making, especially of the committees of regulators, should be facilitated (extension of qualified majority voting and definition of solutions in the case of a blocking minority) and carry more authority (even if non-binding) in relation to the national regulators and supervisors.
Member States also have a key role to play to guarantee the application in full of the standards and guidelines concerning:
- the powers of national supervisors and sanctions. In view of the divergence of the national systems, the regulators and supervisors should have sufficient supervisory powers and tools, including sanctions, to be able to fulfil their obligations;
- the guarantee of the operational independence of national supervisory authorities in four fields: institutional, regulatory, budgetary and supervisory;
- the proposals strengthening cooperation between home and host regulators. The Commission’s role is to raise awareness, evaluate and take measures (delegation of tasks, multilateral memoranda of understanding, role of 'lead' supervisor, etc.).
The development of common standards to ensure optimum cooperation between colleges of supervisors would guarantee greater coherence and uniformity of application and would allow the problems of competences between home and host countries to be resolved.
Cross-sector cooperation is based on a joint protocol on cooperation, signed in 2005, and is provided for when added value can be expected from a joint action. Level 3 Committees have agreed on joint annual work programmes since 2006 to deal with priority subjects such as financial conglomerates and common reporting standards.
As regards crisis management, rapid information procedures must be provided for to ensure efficient, collective action in the case of a major market disturbance or financial crisis.
The Commission considers that some financial assistance from the EU budget may be appropriate in response to the calls made on the committees of regulators arising from their Community obligations.