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European Systemic Risk Board

The 2008 financial crisis revealed many shortcomings in financial supervision. In order to offset these malfunctions, the European Commission has put in place legislative measures that replace the current system by a European System of Financial Supervision (ESFS) the aim of which is to rebuild the trust of European citizens and to prevent the risks of destabilising the global financial system.

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.

SUMMARY

This Regulation establishes the European Systemic Risk Board * (ESRB). It forms part of the package of measures put in place to reform the European System of Financial Supervision (ESFS) which creates three authorities to supervise financial activities:

The package also reforms existing legislation on financial matters with the Omnibus Directive and includes the Regulation conferring specific tasks upon the European Central Bank.

Supervision of the financial system * of the European Union (EU) is further reinforced by:

  • the Joint Committee of the European Supervisory Authorities;
  • the competent or supervisory authorities of Member States.

Objectives of the ESRB

The ESRB is responsible for the macro-prudential oversight of the financial system in the EU. One of its main objectives is to prevent and mitigate systemic risks which might prejudice the financial stability of the EU. In this regard, the ESRB must in particular:

  • determine and collect the information necessary for its action;
  • identify systemic risks and prioritise them;
  • issue warnings and make them public if necessary;
  • recommend measures to be taken once the risks have been identified.

Organisation of the ESRB

The ESRB is composed of:

  • a General Board to ensure the performance of tasks;
  • a Steering Committee which contributes to the decision-making process;
  • a Secretariat responsible for day-to-day business;
  • an Advisory Scientific Committee and an Advisory Technical Committee to provide advice and assistance.

The President of the European Central Bank (ECB) shall chair the ESRB for a term of five years. The Chair will perform his duties assisted by two Vice-Chairs, the first of which shall be elected by and from the General Council of the ECB, while the second shall be the Chair of the Joint Committee.

Members of the ESRB shall have an obligation to comply with the principles of impartiality and professional secrecy when performing their duties, including after their duties have ceased.

Meetings of the General Board shall take place four times a year, preceded by meetings of the Steering Committee. The Chair of the ESRB may convene extraordinary meetings.

The ESRB may also seek the advice of the private sector when necessary.

Warnings and recommendations

The ESRB may issue warnings and make recommendations concerning remedial action to be adopted, or even legislative initiatives. Such recommendations may be addressed:

  • to the EU;
  • to one or several Member States;
  • to one or several European supervisory authorities;
  • to one or several national supervisory authorities.

Recommendations relating to measures to be adopted shall be issued according to a colour code which varies according to the level of risk. If the ESRB observes that its recommendations have not been followed, it shall, confidentially, inform the addressees, the Council and, where relevant, the European Supervisory Authority concerned.

Key terms of the Act
  • Systemic risk: a risk of disruption in the financial system with the potential to have serious negative consequences for the internal market and the real economy.
  • Financial system: all financial institutions, markets, products and market infrastructures.

REFERENCE

ActEntry into forceDeadline for transposition in the Member StatesOfficial Journal

Regulation (EU) No 1092/2010

16.12.2010

-

OJ L 331, 15.12.2010

RELATED ACTS

Council Regulation (EU) No 1096/2010 of 17 November 2010 conferring specific tasks upon the European Central Bank concerning the functioning of the European Systemic Risk Board [Official Journal L 331 of 15.12.2010].

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) Text with EEA relevance [OJ L 331 of 15.12.2010].

Last updated: 08.03.2011

See also

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