European System of Financial Supervision

The European System of Financial Supervision (ESFS) is a network centered around three European Supervisory Authorities (ESAs), the European Systemic Risk Board and national supervisors. Its main task is to ensure consistent and appropriate financial supervision throughout the EU.

As the European banking supervisor, the ECB closely cooperates with the ESAs, especially the European Banking Authority (EBA).

The ESFS covers both macro-prudential and micro-prudential supervision.

Macro-prudential supervision

Macro-prudential supervision involves oversight of the financial system as a whole. Its main aim is to prevent or mitigate risks to the financial system.

European Systemic Risk Board

The European Systemic Risk Board (ESRB) is responsible for macro-prudential supervision of the financial system in the EU.

Although not part of the ECB, the ESRB is based at the ECB’s offices in Frankfurt am Main, Germany, and the ECB ensures its Secretariat.

Tasks

The main tasks of the ESRB are:

  • collecting and analysing relevant information to identify systemic risks
  • issuing warnings where systemic risks are deemed to be significant
  • issuing recommendations for action in response to the risks identified
  • monitoring the follow-up of warnings and recommendations
  • cooperating and coordinating with ESAs and international fora

Composition

The President of the ECB is also the Chair of the ESRB.

The ESRB brings together representatives of the national central banks of EU countries and the Chairs of the three European Supervisory Authorities.

European Systemic Risk Board

Micro-prudential supervision

Micro-prudential supervision refers to the supervision of individual institutions, such as banks, insurance companies or pension funds.

European Supervisory Authorities

The ESAs are the:

  • European Banking Authority (EBA)
  • European Insurance and Occupational Pensions Authority (EIOPA)
  • European Securities and Markets Authority (ESMA)

Tasks

The ESAs work primarily on harmonising financial supervision in the EU by developing the single rulebook, a set of prudential standards for individual financial institutions. The ESAs help to ensure the consistent application of the rulebook to create a level playing field. They are also mandated to assess risks and vulnerabilities in the financial sector.

Composition

Each authority has a Chair who represents the organisation. However, operational decisions are taken by their respective Board of Supervisors, which are composed of representatives of the national supervisors of each country.

Joint bodies

Board of Appeal

The Board of Appeal is an independent body responsible for appeals by those affected by decisions of the three ESAs.

It is composed of six members and six alternates, appointed by the ESAs.

Joint Committee

The Joint Committee of the ESAs ensures cross-sectoral consistency in the development and application of the single rulebook.

Representatives of each of the three ESAs participate in meetings of the Joint Committee, thereby ensuring cooperation and a regular exchange of information.