European supervisory authorities unveil joint independence criteria
The European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA), and European Securities and Markets Authority (ESMA) have jointly released criteria on the independence of supervisory authorities.
These criteria are vital in ensuring that supervisory bodies make impartial, fair, and transparent decisions. Independence of supervisory authorities is key in offering robust protection within the financial sector and instilling trust in the financial system. Remember that in the EU, each of these agencies develops regulations and requirements implemented by supervisors working at a national level. But these criteria seem like pretty universal requirements to us.
The independence criteria outlined are structured around four key principles:
- Operational independence means ensuring that supervisory authorities have the resources, legal powers and ability to operate without influence from the sector they supervise or the government.
- Personnel independence requires transparent rules for appointing, selecting, and removing staff and governing body members, who must adhere to high ethical standards.
- For financial independence it is key that authorities have sufficient financial resources to fulfil their mandates.
- Accountability and transparency – including annual disclosure of comparable data on supervisory decisions, activities, methods and statistics – are also recognised as crucial to support fair, effective supervision.
In 2020, the ESAs were assigned the responsibility of promoting and monitoring supervisory independence. In 2021, they published individual reports on the independence of supervisory authorities within their respective financial sectors. Building upon these reports, the ESAs have now collectively issued these criteria as a tool for enhancing supervisory independence, which can also be used to assess such independence within the EU.
The goal is to maintain the effectiveness and transparency of supervisory authority action. While the criteria are non-binding, they are intended to serve as a practical framework to guide action supporting supervisory independence. The criteria will also be used by the ESAs to assess the independence of supervisory authorities.
You can find the complete independence criteria here.
