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Inaugural Session of the new European Securities Markets Authority (ESMA)

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The Board of Supervisors of the European Securities Markets Authority (ESMA) held its inaugural session today, 11 January 2011, in Paris. Austrian interests in this new European central supervisory institution are represented by the Financial Market Authority (FMA), as a voting member. The FMA is represented in the institution’s committees by Kurt Pribil, Executive Director at the FMA. During the first session, in addition to agreeing the Rules of Procedure, the institution also elected the six members comprising the ESMA Management Board.

“The FMA commits to work actively on the committees of the ESMA, both to robustly represent Austrian interests and to work intensively on the harmonisation of new legislation and the enforcement of the law within Europe,” commented FMA Executive Directors Helmut Ettl and Kurt Pribil, before proceeding to explain, “The creation of a European culture of supervision and consistent and coherent application of EU legislation form the basis for ensuring that Europe is a strong, secure and fair financial market.”

Within the new European supervisory system, which entered into force on 1 January 2011, ESMA is the central European Supervisory Authority (ESA) with responsibility for supervision of the securities markets. Its counterparts in the banking sector and insurance and pensions sector are the London-based European Banking Authority (EBA), and the European Insurance and Occupational Pensions Authority (EIOPA), based in Frankfurt am Main. These three ESAs have been formed from the former level 3 committees (the Committee of European Banking Supervisors, CEBS; the Committee of European Insurance and Occupational Pensions Supervisors, CEIOPS; and the Committee of European Securities Regulators, CESR), on whose infrastructure they have been created.

Each ESA has an independent, full-time Chair, who acts as the face of the authority. The Chair is elected by the Board of Supervisors, and must be confirmed in his or her post by the European Parliament. However, operational and administrative decisions of the authorities are made by the Board of Supervisors, which is composed of one representative of each of the national supervisory authorities of the EU Member States. Austria is represented in this body by the FMA, as a voting member. Alongside the Board of Supervisors, each of the ESAs has a Management Board comprising six members, to which responsibility is conferred for specific organisational tasks. Each of the authorities is led by an Executive Director, who prepares the work of the Management Board. He or she is appointed by the Board of Supervisors.

The three authorities will continue the activities of the former level 3 committees. However, their scope of activity, responsibilities and therefore the powers available to them for inspection have been greatly expanded – in close cooperation with the national supervisory authorities – in line with their position as an authority. To this end, they must conduct regular comparative analysis (referred to as peer reviews), and must monitor and evaluate market developments, and develop criteria and methods for measuring systemic risks. In the event of differences of opinion and disagreements between national supervisory authorities, they may also issue decisions that are binding for all concerned, and may also issue decisions directly to financial institutions in the exercising of their specific supervisory powers.

In addition, ESMA is to take a leading role in encouraging transparency, simplicity and fairness in the market for financial products and services for consumers in the internal market, thus increasing protection for investors. Furthermore, ESMA has been accorded the first centralised supervisory activity in ensuring the supervision of rating agencies, with responsibility for their registration and approval procedures. Another key area of emphasis in this initial year will be the implementation of the 2010 Directive on Alternative Investment Fund Managers (AIFM). This proposes an EU passport system for alternative investment funds, and is intended to reinforce transparency in this segment. ESMA will also be involved in the new European Market Infrastructure Regulation (EMIR) and the future Securities Law Directive (SLD). The objective of EMIR is to harmonise the central clearing houses in Europe and to implement further reaching regulation of OTC derivatives.

Klaus Grubelnik (FMA Media Spokesperson)
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