The European Supervisory Authorities: role-models or in need of re-modelling?
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The European Supervisory Authorities: role-models or in need of re-modelling? Kostas Botopoulos1
© The Author(s) 2020
Abstract The three European Supervisory Authorities (ESAs) are, for almost a decade now, part of the financial landscape, arbiters as well as players in what has turned out to be a complex and frail system. They have served well, but should they remain unchanged? The present article analyses the way they were conceived and set up, their architecture, their legal and substantive characteristics and deals with the question of their reform. Keywords European Supervisory Authorities (ESAs) · Agencies plus · Review vs reform · Capital Markets Union
1 Crisis, what crisis? 1.1 Raison-d-etre Global crises beget international institutions: it has been true with two out the three major financial crises of the 20th and 21st century. Only the 1929 crash, mainly impacting the USA in what was then an un-globalised era, was dealt with mostly internally, by means of the New Deal policy mix; the end of the two world wars and the financial disruption it created gave birth (1944) to the Bretton Woods institutions: the International Monetary Fund, the World Bank and, at a deeper level, the so-called “Washington consensus” whose laissez-faire spirit permeated financial activities and financial supervision for decades; whereas the crisis of 2009, in a wholly globalised Doctor of Constitutional Law, ex Chair of the Hellenic Capital Markets Commission, member of the ESMA Board of Supervisors and Management Board, and today representative of the Bank of Greece at the EBA
B K. Botopoulos 1
Bank of Greece, 21 E. Venizelos Ave, 102 50 Athens, Greece
K. Botopoulos
environment, was at the epicentre of the G-20 Summit in Pittsburgh, which confirmed the urgency of more regulation as well as supra-national supervision of financial activities and produced, at European Union level, the three ESAs. Although the premises were there for everyone, and mainly the already existing specialised bodies, to see, the crisis acted as a catalyst by presenting the world, and primarily its political leaders, with an amplifying mirror in which the main flaws of the financial system were reflected: risk, often excessive risk, and surely cross-border risk, went undetected; supervision was uncoordinated and ineffective; systemic issues were ignored; decision-making was slow and topical; not only was there not any confidence in the system but the system entirely lacked confidence-building mechanisms. The “de Larosière Report”1 phrased it succinctly: the then existing EU arrangements placed “too much emphasis on the supervision of the financial firms and too little on the macro-prudential side”; “there was no mechanism to ensure that the assessment of risk was translated into action”; “the processes and practices for challenging the decisions of a national supervisor have proven to be inadequate”; “information flow among supervisors was far from optimal”. All in all, it was stated without ambiguity that “the crisis-prevention function of supervis
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