The European System of Financial Supervision (ESFA) consists of three supervisory authorities: the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA), and the European Insurance and Occupational Pensions Authority (EIOPA). Those three authorities were established on 1 January 2011. They are independent European authorities and they are accountable to the Council of the European Union, the European Parliament, and the European Commission. The European Systemic Risk Board (ESRB) complements this framework.
The European Systemic Risk Board (ESRB) was established on 16th December 2010 in order to rebuild the trust in the financial system. It is focusing on the stability of the financial system of the Union as a whole. It should identify potential risks within the European financial system. Moreover, the ESRB should give advice in order to reduce those possible threats to the financial stability within the EU. Therefore, the task of the ESRB is the macro-prudential supervision of the financial system within the European Union. For this reason, it is collecting and analyzing information on the evolution of the financial system. Thus, the European Systemic Risk Board should contribute to an early detection, prevention and mitigation of systemic risks within the European financial market.
The main task of the European Banking Authority (EBA) is to contribute to the creation of a single European rulebook in the field of banking. This should provide harmonised and effective rules for financial institutions within the EU. Moreover, this single European rulebook provides protection for investors, depositors and consumers.
The EBA is also intended to guarantee a harmonised adaptation of prudential rules. For this reason, it investigates insufficient or incorrect application of European law by national competent authorities. Additionally, the EBA rates risks as well as vulnerabilities in the European banking sector by providing regular risk assessment reports and by the realization of stress tests within the European Union. In emergency situations it can take decisions that are directed directly to individual financial institutions or national competent authorities. Besides, it plays an important role in the promotion of transparency in the market of financial products and services within the single European market. It is based in London, UK.
One of the main tasks of the European Securities and Market Authority (ESMA) is to contribute to the stability of the European financial system by ensuring efficiency, orderly functioning and transparency of securities markets. It is also intended to foster supervisory convergence across financial sectors and securities regulators.
ESMA is also responsible for the supervision and registration of Credit Rating Agencies within the EU. Besides, it is also involved in the creation of a single European rulebook. This should, on the one hand, ensure a consistency in the treatment of different investors within the European Union. On the other hand, this should also contribute to the creation of equal conditions for financial service providers. It is based in Paris, France.
One of the main goals of the European Insurance and Occupational Pensions Authority (EIOPA) is to rebuild trust in the financial system. Besides, it should contribute to the creation of more transparent financial products and financial markets. EIOPA is intended to oversee and identify potential risks and vulnerabilities that are stemming from micro-prudential regulations. Moreover, it should ensure a consistent and high level of supervision and regulation by taking into account the differing interests of all member states and of different financial institutions. Another goal is the greater harmonisation of rules across the European Union. This also includes the promotion of coordinated supervisory response. It is based in Frankfurt am Main, Germany.
The Financial Stability Board (FSB) is an international body that monitors and makes recommendations about the global financial system. It promotes international financial stability; it does so by coordinating national financial authorities and international standard-setting bodies as they work toward developing strong regulatory, supervisory and other financial sector policies. It fosters a level playing field by encouraging coherent implementation of these policies across sectors and jurisdictions. The FSB, working through its members, seeks to strengthen financial systems and increase the stability of international financial markets. The policies developed in the pursuit of this agenda are implemented by jurisdictions and national authorities. The FSB, through the Standing Committee on Standards Implementation (SCSI), coordinates and oversees the monitoring of the implementation of agreed financial reforms and its reporting to the G20. It also proposes a Framework for Post-Implementation Evaluation of the Effects of the G20 Financial Regulatory Reforms.
The Bank for International Settlements launched an interactive repository of studies dealing with the effects of financial regulations, called FRAME. The purpose of FRAME is to keep track of, organize, standardize and disseminate the latest findings. The repository covers numerous studies and quantitative impact estimates currently from 15 countries or group of countries, offering a novel and comprehensive perspective on what the research literature has been able to document to date, and where gaps exist.
The Vienna Initiative is a European Bank Coordination with the aim of ensuring financial stability in emerging Europe. The initial stage (Vienna 1.0) was launched during the global financial crisis in January 2009. It provided a platform for dialogue and coordination in order to create conditions for Western banks that should prevent a withdrawal of money from emerging Europe. Due to the sovereign debt crisis in Europe, the Vienna 2.0 initiative was launched in January 2012. It also provides a forum, in which private and public sector actors can report on and coordinate the deleveraging process.
During the World Financial Crisis, the US Federal Reserve implemented dollar and foreign currency swap lines to improve liquidity conditions in the United States and abroad. These instruments operated as swap contracts between central banks, which then provided this extra liquidity to financial institutions in their own jurisdictions. In a context of growing pressures in interbank markets these arrangements worked as liquidity backstops supporting financial stability. The liquidity swap arrangements represent a prime example of cooperation between central banks during an international financial crisis. England, Japan, Brazil and Mexico were among the countries taking part in these arrangements between 2007 and 2010.