Introduction to the European System of Financial Supervision

One of the European responses to the financial crisis which started in 2007, was the creation of a new architecture for financial supervision in Europe. The new European supervisory structure came into force on January 1, 2011, less than two years after the publication of the “de Larosière report” which recommended the new structure in response to the financial crisis. With the goal of maintaining financial stability in Europe, the European System of Financial Supervision (ESFS) is built on a two pillar supervisory approach. One pillar refers to microprudential supervision and consists of three European Supervisory Authorities (ESAs) and the European Central Bank (ECB). The other, a macroprudential pillar, is the European Systemic Risk Board (ESRB) and the ECB. At the microprudential level, the European Banking Authority (EBA) is created for the banking sector, the European Securities and Markets Authority (ESMA) for securities markets, and the European Insurance and Occupational Pensions Authority (EIOPA) for the insurance and occupational pensions sector. Furthermore, a Joint Committee of the ESAs is established for coordinating the microprudential activities across Europe.

The three ESAs and the ECB coordinate supervision of, and regulations for, European markets and do not replace existing national competent authorities (NCA), which continue to be involved in the day-to-day supervision.