(Adds UK business reaction, detail on ESRB)
By Huw Jones
LONDON, June 24 The European Union's markets,
banking and insurance watchdogs could be funded by a levy on the
organisations they supervise, in an attempt by the bloc's
executive body to save taxpayers' money.
The European Commission has been reviewing the three
watchdogs it launched in 2011 to make supervision of banks,
markets and insurers more consistent across its 28 member
countries after the 2007-09 financial crisis highlighted
failings in the way regulations were enforced.
The European Securities and Markets Authority (ESMA), the
European Banking Authority (EBA) and the European Insurance and
Occupational Pensions Authority (EIOPA) currently receive 60
percent of their funding from national supervisors and 40
percent from the central EU budget.
"Given EU and national budgetary constraints, the Commission
considers that a revision of the existing funding model should
therefore be envisaged, ideally abolishing EU and national
contributions," a draft European Commission report seen by
Staffing and budgets of the three watchdogs are modest
compared with regulators in the larger member states, such as
Britain's Financial Conduct Authority whose annual budget is 452
million pounds ($768.8 million). The EBA's budget for 2014 is
only 33.6 million euros ($45.7 million).
However, the welter of EU rules approved to tighten
supervision after the financial crisis, such as for derivatives,
and bank and insurance capital, means the watchdogs will be
taking on more responsibilities and will need extra staff and
The three watchdogs have about 150-200 staff each and rely
heavily on national regulators to help with their workloads.
The Association for Financial Markets in Europe (AFME), a
top banking lobby, has called for ESMA in particular to have
more resources. ESMA is the main regulator for credit rating
agencies and trade repositories in the EU.
The report did not give any indication of how much the tax
on banks and insurers might be, but any levy would likely be
applied in direct proportion to how much supervision an
Euro zone banks will also have to foot the bill for the
European Central Bank's new supervisory arm. Banks under its
watch will each be asked to contribute up to 15 million euros
annually to help cover costs that are set to hit 260 billion
euros next year.
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Member states could welcome the shift to industry-funded
watchdogs - a common system of financing supervision.
However, Britain's Institute of Directors, a business lobby,
said it was concerned with any attempt to offload supervision
costs onto the industry, which is already paying a levy to UK
"Abolishing both EU and national contributions would send a
message that Brussels is willing to expand its oversight powers
without being willing to pay for the privilege," the IOD said.
The report also looks at how the powers of the three EU
agencies could be extended.
It said potential new areas include enforcing accounting
rules, supervising the "shadow banking" sector, settlement
houses, market benchmarks, and clearing houses, a step Britain
is likely to oppose as it seeks to draw a line on more powers
being centralised at the EU level.
The report, which is expected to be published in coming
months and is subject to change, said the three watchdogs have
performed well so far and have begun to develop their own
They should, however, give consumer and investor protection
a higher priority, the report said.
Governance of the watchdogs could be improved further to
make decision making faster in the interests of the EU as a
whole, the report said, in a nod to British concerns to
safeguard the bloc's single market.
The report made no recommendations regarding the fourth EU
body set up after the financial crisis, the European Systemic
Risk Board (ESRB), which is chaired by the European Central Bank
president Mario Draghi. It was set up to spot system-wide risks
and has been criticised for failing to forge a clear role in the
($1 = 0.5880 British Pounds)
($1 = 0.7357 Euros)
(Additional reporting by John O'Donnell in Frankfurt; Editing
by Erica Billingham)