EBA欧洲银行-Final-Report-on-cross-border-supervision-of-retail-financial-services_79页_1mb

Summary of the Report on Cross-Border Supervision of Retail Financial Services

Core Content

This report, issued by the European Supervisory Authorities (ESAs) on 9 July 2019, outlines the main challenges that national competent authorities (CAs) face in supervising the cross-border provision of retail financial services. It also provides a legal mapping of relevant EU directives and regulations, identifies high-level principles for cooperation between home and host CAs, and makes recommendations to both EU co-legislators and CAs.

Main Issues Identified

The ESAs have identified three main categories of issues that CAs face:

1. Institutional and Organisational Issues

• Notifications and Exchange of Information: Passport notifications often lack completeness or compliance with standard forms, and there are delays in responses from home CAs to host CAs’ requests for additional information. This hinders effective supervision and cooperation.
• Unclear Distribution of Responsibilities: There is a lack of clarity on how responsibilities are divided between home and host CAs. Some legislation assigns exclusive supervision to the home CA, while others distribute responsibilities.
• Challenges in Identifying Contact Points: CAs struggle to identify appropriate contact points for informal communication, especially for supervisory staff not involved in licensing or passporting.
• Ambiguity in FPS and ROE: It is difficult to determine whether digital activities fall under the freedom of services (FPS) or the right of establishment (ROE), leading to confusion about which CA is responsible for supervision.
• Dual Use of FPS and ROE: Financial institutions that use both FPS and ROE for cross-border operations create supervisory challenges, as it is unclear which part of the institution is responsible for the service.
• Lack of General Conduct Rules: In the banking sector, the absence of a unified legal framework for general conduct matters leads to unclear responsibilities between home and host CAs.

2. Supervision and Enforcement Issues

• Misleading Cross-Border Marketing: Financial institutions often market complex and unsuitable products aggressively to retail clients in host Member States (MS), especially through online channels.
• Use of Third Parties: Financial institutions use third parties (not tied agents or regulated entities) to distribute services in host MSs. These third parties may offer regulated services, but there is no obligation for the financial institution to notify their use, making supervision more challenging.
• Prioritisation of Domestic Supervision: Some CAs may prioritize the supervision of financial institutions in their home jurisdiction, leading to less attention on cross-border activities. This is particularly evident in cases of 'jurisdiction shopping', where institutions operate in a MS without substantial business presence.
• Need for Enhanced Verification: Host CAs need more involvement from home CAs in verifying that cross-border activities comply with the scope of the passport notification and in assessing the organization and resources of the financial institution.

3. Regulatory Gaps and Regulatory Arbitrage

• Insufficient Harmonisation and Clarity: Differences in national implementation of EU legislation create a level playing field issue and enable regulatory arbitrage, where financial institutions may choose jurisdictions with more lenient rules.
• Uneven Application of Restrictions: Financial institutions operating under FPS may not be subject to the same restrictions as local institutions, leading to potential regulatory inconsistencies.

Legal Mapping

The ESAs mapped the relevant Level 1 texts, including:

• Insurance Distribution Directive (IDD)
• Solvency II (SII)
• Markets in Financial Instruments Directive II (MiFID2) and Regulation (MiFIR)
• Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation
• Undertakings for the Collective Investment in Transferable Securities (UCITS) Directive
• Alternative Investment Funds Managers (AIFM) Directive
• Payment Services Directive II (PSD2)
• E-money Directive
• Capital Requirements Directive (CRD4) and Regulation (CRR)
• Mortgage Credit Directive (MCD)
• Payment Accounts Directive (PAD)
• European Venture Capital Funds (EuVECA) Regulation
• European Social Entrepreneurship Funds (EuSEF) Regulation
• European Long-Term Investment Funds (ELTIF) Regulation
• Consumer Protection Cooperation Regulation (CPCR)

These texts were reviewed to identify provisions related to:

• Definition of cross-border provision
• Passporting (services and products)
• Notifications and exchange of information
• Home and host responsibilities
• Information reporting requirements for host CAs
• Simultaneous exercise of FPS and ROE
• FPS by a branch in a host MS for services in a third MS
• Jurisdiction shopping

Recommendations

For EU Co-legislators

• Reinforce Harmonisation: Strengthen the harmonisation of Level 1 provisions, especially in the banking sector, to ensure clarity and consistency.
• Clarify Passporting Scope: Provide more clarity on when digital activities fall under FPS or ROE, and how cross-border provision is defined.
• Address Supervisory Difficulties: Explore ways to overcome challenges related to the simultaneous use of FPS and ROE, or when a branch provides services in a third MS.
• Prevent Regulatory Arbitrage: Encourage legislation that prevents financial institutions from opting for jurisdictions with less stringent standards.
• Enhance Passport Information: Require that passport regimes include information on whether products and services are actually provided.
• Clarify Delicences: Define the conditions that a home CA should consider before granting a passport.
• Introduce Supervisory Powers: Consider introducing supervisory powers in the case of significant divergences from the initial business plan, including the withdrawal of authorisation if services are not provided.

For CAs

• Ensure Effective Collaboration: Promote regular and effective exchange of information to identify potential issues early.
• Follow High-Level Principles: Apply the high-level principles for cooperation outlined in the report, especially in the absence of detailed legal requirements.
• Maintain Updated Registers: Liaise with ESAs to keep contact point registers and accepted communication methods up to date.
• Improve Cross-Sectoral Cooperation: Work with ESAs to enhance cooperation frameworks in consumer protection, particularly in the banking sector.

Conclusion

The report highlights the importance of supervisory convergence as a prerequisite for the proper functioning of the single market and the flourishing of cross-border financial services. While some recent legislation has addressed certain issues, more work is needed to ensure consistency and clarity in the regulatory framework. The recommendations aim to improve cooperation between CAs, enhance consumer protection, and reduce the risks associated with regulatory arbitrage and unclear responsibilities.