This blog has paid careful attention to the current strengthening of centralized enforcement of EU law by European institutions, organisms and bodies, which is increasingly replacing national implementation in many areas of law. This process is also taking place when national authorities were entrusted with the enforcement of EU secondary law that provided for transnational administrative acts. In particular, both transnational authorizations and ex post administrative measures adopted by national authorities are being substituted by enforcement decisions taken by EU agencies, at times after the implementation of a composite procedure. The point that I want to make here is twofold: leaving aside its impact on EU law effectiveness, centralization transfers problems of compliance with constitutional requirements of administrative enforcement towards EU agencies, and ultimately it intensifies the constitutional dimension of the Court of Justice of the European Union (CJEU).
The establishment of the European Banking Union (EBU) stands as a paradigm for how the EU has become increasingly involved in directly enforcing EU law throughout recent years. The institutional centerpiece of the EBU is the so-called Single Supervisory Mechanism (SSM), a supervisory network under the auspices of the European Central Bank (ECB) assigned with the task to monitor the Euro-area banking system. Apart from its coordinating functions in relation to the national competent authorities (NCAs), the ECB is responsible for directly supervising the business activities of the 120 most significant credit institutions in the Euro-area in accordance to the so-called Single Rulebook, a set of harmonised prudential rules which credit institutions registered in the EU must adhere to.
This blog post is not doubting the importance of this type of vertical monitoring of market participants through public supervisory action. However, the recent crisis has shown that public enforcement is subject to several vulnerabilities. Even though the EBU may be able to overcome some of these vulnerabilities, several others will certainly remain. Thus, it is argued here that the existing supervisory architecture should be complemented by horizontal mechanisms of behavioral control. Central to this approach is a private enforcement of the Single Rulebook, i.e. the granting of individual causes of action for damages resulting from an institutions’ violation of EU banking regulation (as it is well-established for example in the area of EU competition law).
The Markets in Financial Instruments Regulation Nº600/2014 (MiFIR) that entered into force on the 3rd of January 2018 establishes intervention powers for National Competent Authorities (NCAs), the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA). This post discusses these ‘MiFIR’ developments. Other key developments in this area are the Packaged Retail and Insurance-Based Investment Products Regulation (PRIIPs), which introduces product intervention powers for National Competent Authorities, and the European Insurance and Occupational Pensions Authority (EIOPA).
The European Insurance and Occupational Pensions Authority (EIOPA or the Authority) is one of three European Supervisory Authorities (ESAs) created in the aftermath of the financial crisis. They are part of the European System of Financial Supervision (ESFS), a supervisory system created to ensure proper financial supervision of, for example, banks, insurance companies and pension institutions. The other two ESAs are the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA).
The European Securities and Markets Authority (ESMA) is exclusively competent for the direct supervision of credit rating agencies (CRAs) and trade repositories (TRs). ESMA is in fact the only EU agency that can exercise monitoring, investigating and sanctioning powers by itself. However, the question rises whether ESMA also renders accountability for such powers. The delegation of enforcement powers to ESMA appears to have been coupled with the establishment of sufficient political and judicial accountability mechanisms. The accountability framework may thus be assigned ‘AAA’ status. However, if changes were to happen on the basis of the ongoing revision of the operations of the European Supervisory Authorities, e.g. if ESMA’s direct supervisory powers would be extended to other areas of financial services, one important recommendation is to pair such delegation with appropriate changes to the accountability framework so that the ‘AAA’ status can be upheld.