Can soft law bodies be effective? The special case of the european systemic risk board

European Law Review

Volumn 35, Issue 6, 2010, Pages 751-776

  Ferran, Eilís ^a   Alexander, Kern ^a  

^a UNIVERSITY OF CAMBRIDGE   (United Kingdom)

Author keywords

[No Author keywords available]

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EID: 79551658959     PISSN: 03075400     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (239)

1. H. Paulson, "The New Rules of Finance: Experts Grade the Legislation" Wall Street Journal iu\y 16,2010, A.5.
2. G20 Communique, "Declaration on Strengthening the Financial System" (London Summit, April 2009).
3. HM Treasury, A New Approach to Financial Regulation: Judgement, Focus and Stability (Cm 7874, July 2010).
4. See Federal Act on the Swiss Financial Market Supervisory Authority (effective January 2009).
5. For the ECB's Opinion relating to this development see Opinion of the European Central Bank of January 7,2010, (CON/2010/3). It has been suggested that the European Union should mandate the introduction of national level systemic risk regulators across the Member States.
6. S. Kapoor, Emergent Global Challenges: What Europe Needs to Do to Tackle the Triple Crises of Tax, Finance and Climate (Brussels: European Parliament's Special Committee on the Financial, Economic and Social Crisis (CRIS), April 2010).
7. House of Commons Treasury Committee, Opinion on Proposals for European Financial Supervision (Sixteenth Report of Session 2008-09), para.49.
8. See also G. Hertig, R. Lee and J. A. McCahery, "Empowering the ECB to Supervise Banks: A Choice-Based Approach" (ECGI Finance WP 262/2009)
9. Kapoor, Emergent Global Challenges (April 2010), (calling for the ESRB to have statutory powers).
10. For a detailed study of both the coercive effect of international financial soft law and its limitations see C.J. Brummer, "How International Financial Law Works (and How it Doesn't)" (2011) 99 Geo.L.J. (forthcoming), abstract available at http://ssrn.com/abstract=1542829 [Accessed October 13,2010].
11. For general evaluation of IMF surveillance see D. Lombardi and N. Woods, "The Politics of Influence: An Analysis of IMF Surveillance" (2008) 15 Review of International Political Economy 711
12. B. Bossone, "The Effectiveness of IMF Surveillance: A Study on Global Financial Governance" (2008) 9 World Economics 27.
13. International legal scholarship also recognises the concept of soft provisions within treaties or other binding legal instruments, but this type of soft law is not relevant to international financial regulation. On the diversity of instruments falling under the "soft law" umbrella.
14. see CM. Chinkin, "The Challenge of Soft Law: Development and Change in International Law" (1989) 38 I.C.L.Q. 850
15. A. Boyle, "Some Reflections on the Relationship of Treaties and Soft Law"(1999)48I.C.L.Q.901.
16. See http://www.fmancialstabilityboard.org/cos/key-standards.htm [Accessed October 13,2010].
17. Organisations that provide the key standards listed by the FSB include international Treaty-based associations (World Bank, IMF), less formally constituted public sector groups (e.g. Basel Committee, International Organization of Securities Commissions (IOSCO), Organization for Economic Co-operation and Development (OECD)) and groups that have significant private sector representation (e.g. the International Accounting Standards Board (LASB)).
18. Generally on soft law bodies: J. Klabbers, "Institutional Ambivalence by Design: Soft Organizations in International Law" (2001) 70 Nordic Journal of International Law 403.
19. A.M. Slaughter, A New World Order (Princeton: Princeton University Press, 2004), p. 180.
20. FSB, Framework for Strengthening Adherence to International Standards (January 2010).
21. On the IMF/World Bank Financial Sector Assessment Program (FSAP) and Reports on Observance of Standards and Codes (ROSCs) see http://www.imf.org/ external/NP/fsap/fsap.asp [Accessed October 13, 2010].
22. See also C. Gola and F. Spadafora, "Financial Sector Surveillance and the IMF" (IMF WP/09/247). Another example of soft enforcement is provided by the Financial Action Task Force (FATF), which operates a mutual evaluation process to promote implementation of its anti-money laundering and counter-terrorist financing standards: FATF, Annual Report 2008-2009, pp.12-15.
23. CM. Chinkin, "The Challenge of Soft Law" (1989) 38 I.C.L.Q. 850, 862-863.
24. B. Bossone, "The Effectiveness of IMF Surveillance" (2008) 9 World Economics 27.
25. D. Strauss-Kahn, "National, European, or Global? The Future of Bank Regulation", speech of November 24, 2009 Text of speech available at: http://www.imf.org/external/np/speeches/2009/112409.htm.
26. FSB, Framework for Strengthening Adherence to International Standards (January 2010). On the "hardening" effect of this commitment to peer review.
27. D.W. Arner and M.W. Taylor, "The Global Financial Crisis and the Financial Stability Board: Hardening the Soft Law of International Financial Regulation?" (2009) 32 University of New South Wales Law Journal 488, 498-500.
28. In 2000 the OECD identified a number of jurisdictions as tax havens. By 2009 no country remained on the list because all had given commitments to implement OECD transparency standards.
29. The IOSCO Code of Conduct Fundamentals for Credit Rating Agencies is an example of an international code aimed at influencing industry practice.
30. G.C. Shaffer and M.A. Pollack, "How Hard and Soft Law Interact in International Regulatory Governance:Alternatives, Complements and Antagonists" (2010) 94 Minn.L. Rev. 706
31. H. Hillgenberg, "A Fresh Look at Soft Law"(1999)19E.J.I.L.499.
32. Sunday Times v United Kingdom (A/30) (1979) 2 E.H.R.R. 245 at [271] and [149].
33. H. Hillgenberg, "A Fresh Look at Soft Law" (1999) 19 E.J.I.L. 499.
34. CM. Chinkin, "The Challenge of Soft Law" (1989) 38 I.C.L.Q. 850, 852.
35. The characterisation of IFRS as a "principles-based" system and its comparison with the so-called "rules-based" system of US domestic accounting standards are overstated because both systems use a combination of bright line rules and vaguer concepts: LA. Cunningham, "A Prescription to Retire the Rhetoric of 'Principles-Based Systems' in Corporate Law, Securities Regulation, and Accounting" (2007) 60 Vand.L.R. 1411.
36. e.g. The Basel Committee (membership comprising Central Bank Governors and senior financial market supervisors).
37. K. Alexander, "Global Financial Standard Setting, the G10 Committees, and International Economic Law" (2009) 34 Brook.J.Int'l.L. 861
38. International Accounting Standards Board (membership comprising accounting experts): E. Ferran, "Capital Market Openness After Financial Turmoil", forthcoming in P. Koutrakos and M. Evans (eds), Beyond the Established Orders - Policy Interconnections Between the EU and the Rest of the World (Oxford: Hart Publishing, 2011).
39. D. Zaring, "Three Challenges for Regulatory Networks" (2009) 43 International Lawyer 211,214 (attributing the Basel Committee's success to its exclusivity).
40. A. Boyle, "Some Reflections" (1999) 48 I.C.L.Q. 901, 903.
41. MK. Abbott and D. Snidal, "Hard and Soft Law in International Governance" (2003) 54 International Organization 421.
42. e.g. in the height of the financial crisis there was harsh criticism from EU institutions of the IASB's response to problematic accounting issues. The IASB was described as being "inflexible, slow, over-academic and out of touch": C. McCreevy, "Financial Reporting in a Changing World", speech of May 7,2009. Text of speech available at: http://www.iasplus.com/ europe/0905mccreevy.pdf{Accessed October 13, 2010].
43. IMF-FSB Early Warning Exercise (IMF Factsheet, 2009).
44. IMF, Initial Lessons of the Crisis for the Global Architecture and the IMF (IMF Strategy, Policy and Review Dept., 2009)
45. T. Kato, "Early Warning Systems and Their Role in Surveillance", speech of February 12,2010. Text of speech available at: http://www.imf.org/external/np/speeches/2010/020910.htm [Accessed October 13,2010].
46. See also Strauss-Kahn, "National, European, or Global?", speech of November 24,2009.
47. E.R. Carrasco, "The Global Financial Crisis and the Financial Stability Forum: The Awakening and Transformation of an International Body" (2010) 19 Transnational Law & Contemporary Problems 203.
48. IMF, Initial Lessons of the Crisis (IMF Strategy, Policy and Review Dept., 2009).
49. See also J. Wilkinson, K. Spong and J. Christensson, "Financial Stability Reports: How Useful During a Financial Crisis?" (2010) 95 Economic Review - Federal Reserve Bank of Kansas City 41 (finding that regular financial stability reports were a useful tool for identifying risks but that regulators and financial institutions failed to respond with sufficient vigour).
50. J. Stiglitz, "Watchdogs Need Not Bark Together" Financial Times, February 10,2010, p.9.
51. e.g. whilst countries have signed up to transparency standards in respect of tax information, the record on implementation is much more patchy: OECD, A Progress Report on The Jurisdictions Surveyed by the OECD Global Forum in Implementing the Internationally Agreed Tax Standard: Progress made as at 18th February 2010.
52. Generally, C.J. Brummer, "How International Financial Law Works (and How it Doesn't)" (2011) 99 Geo.L.J. (forthcoming), (considering weaknesses in monitoring and other lax disciplines that undermine the compliance pull of soft law).
53. C.J. Brummer, "How International Financial Law Works (and How it Doesn't)" (2011) 99 Geo.LJ. (forthcoming).
54. J. Klabbers, "The Undesirability of Soft Law" (1998) 67 Nordic Journal of International Law 381,385.
55. J. Klabbers, "The Undesirability of Soft Law" (1998) 67 Nordic Journal of International Law 381,385.
56. B. Kingsbury, N. Krisch and R.B. Stewart, "The Emergence of Global Administrative Law" (2005) 68 Law & Contemp. Probs. 15,17.
57. But compare C. Harlow, "Global Administrative Law: The Quest for Principles and Values" (2006)17E.J.I.L. 187.
58. K. Alexander, R. Dhumale and J. Eatwell, Global Governance of Financial Systems: The International Regulation of Systemic Risk (Oxford: Oxford University Press, 2006), pp.34-74.
59. B. Bossone, "The Effectiveness of IMF Surveillance" (2008) 9 World Economics 27, 28.
60. Committee on IMF Governance Reform, Final Report (March 2009). Follow-up to this review is ongoing.
61. see, e.g. issues relating to mandate reform discussed in The Fund's Mandate-An Overview of Issues and Legal Framework (IMF PIN No.10/33, February 26,2010).
62. A. Boyle, "Some Reflections" (1999) 48 I.C.L.Q. 901, 913.
63. Note, however, the High Level Group on Financial Supervision in the European Union, Report (February 2009) (cfe Larosiere Report), para.230 which hints at the eventual establishment of a full international standard-setting authority, established by a treaty.
64. Article 288 TFEU lists Regulations, Directives, Decisions, Recommendations and Opinions. Recommendations and Opinions are forms of EU soft law but the category can also embrace communications, notices, guidelines, codes of conduct and interpretative declarations.
65. L. Senden, Soft Law in European Community Law (Oxford: Hart Publishing,2004), p.3.
66. See further B. de Witte, "Legal Instruments and Law-Making in the Lisbon Treaty" in S. Griller and J. Ziller (eds), The Lisbon Treaty: EU Constitutionalism Without a Constitutional Treaty? (Vienna: Springer, 2008), p.79
67. J-C. Piris, The Constitution for Europe: A Legal Analysis (Cambridge: Cambridge University Press, 2006), p.71.
68. B. de Witte, "Legal Instruments and Law-Making in the Lisbon Treaty" in S. Griller and J. Ziller (eds), The Lisbon Treaty: EU Constitutionalism Without a Constitutional Treaty? (Vienna: Springer, 2008), p.83.
69. A. von Bogdandy, J. Bast and F. Amdt, "Legal Instruments in European Union Law and Their Reform: A Systematic Approach on an Empirical Basis" (2004) 23 Yearbook of European Law 91, 92.
70. L. Senden, Soft Law (Oxford: Hart Publishing, 2004), Ch.7.
71. Salvatore Grimaldi v Fonds des Maladies Professionnelles (C-322/88) [1989] E.C.R. 4407.
72. M. Dawson, "Soft Law and the Rule of Law in the European Union: Revision or Redundancy?" (EUIWP 2009/24).
73. L. Senden, Soft Law (Oxford: Hart Publishing, 2004), p. 112.
74. L. Senden, Soft Law (Oxford: Hart Publishing, 2004), pp.118-9.
75. D.M. Trubek and L.G. Trubek, "Hard and Soft Law in the Construction of Social Europe: The Role of the Open Method of Coordination" (2005) 11 E.L.J. 343.
76. M. Dawson, "Soft Law" (EUI WP 2009/24) 16-22.
77. European Parliament Resolution on the institutional and legal implications of the use of soft law instruments (2007/2028(INI),P6-TA(2007)0366) .
78. European Parliament Resolution (2007/2028(INI), P6-TA(2007)0366)
79. European Parliament Resolution (2007/2028(INI), P6-TA(2007)0366).
80. European Parliament Resolution (2007/2028(INI), P6-TA(2007)0366).
81. P. Craig and G. de Burca, EULaw: Text, Cases and Materials, 4th edn (Oxford: Oxford University Press, 2007), p.87.
82. European Commission, Driving European Recovery COM(2009) 114, para.2.2.
83. N. Moloney, "The Financial Crisis and EU Securities Law-Making: A Challenge Met?" in S. Grundmann, B. Haar, H. Merkt, P.O. Millbert and M. Wellenhofer (eds) Festschrift fur Klaus J. Hopt zum 70. Geburtstag (Berlin: deGruyter,2010),p.2265.
84. European Commission, Communication from the Commission on Credit Rating Agencies [2006] OJ C59/2 (soft law)
85. Regulation 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies [2009] OJ L302/1 (hard law). The regulation of deposit guarantees is tracking a similar course from soft Communications to proposals for hard-edged legislative reform: European Commission, Proposal for a Directive of the European Parliament and of the Council on Deposit Guarantee Schemes COM(2010) 369.
86. Moloney, "The Financial Crisis and EU Securities Law-Making" in S. Grundmann, B. Haar, H. Merkt, P.O. MOlbert and M. Wellenhofer (eds) Festschrift fur Klaus J. Hopt zum 70. Geburtstag (Berlin: de Gruyter, 2010), p.2265.
87. Article 132 TFEU.
88. Article 127(5) TFEU, and ESCB Statute, arts 4 and 25. With respect to the ECB's advisory role: arts 124(4) and 282(5) TFEU.
89. See E. Ferran, "Understanding the Shape of the New Institutional Architecture of EU Financial Market Supervision", abstract available at http://ssrn.com/abstract=1701147 [Accessed November 10,2010] (discussing the peer review activities of the Level 3 Committees). Such methods are also well-established in other fields of EU law: N. Petit and M. Rato, "From Hard to Soft Enforcement of EC Competition Law - A Bestiary of'Sunshine' Enforcement Instruments" in C. Gheur and N. Petit (eds), Alternative Enforcement Techniques in EC Competition Law (Brussels: Emile Bruylant, 2009), p. 183.
90. European Council, Presidency Conclusions, June 18-19, 2009.
91. European Commission, Review of the Lamfalussy process - Strengthening Supervisory Convergence COM(2007) 727.
92. A weakness highlighted by the IMF: IMF, Euro Area Policies: 2007 Article IV Consultation-Staff Report (IMF Country Report No.07/260), 27.
93. Memorandum of Understanding on Cooperation in Crisis Situations (2003), prepared by Banking Supervisory Committee of the ESCB: CEBS, Annual Report 2004,24
94. Memorandum of Understanding (2005): CEBS, Annual Report 2005,25. These MOUs were tested in several so-called "war games": CEBS, Annual Report 2006, 5,25-26.
95. Discussed in K. Alexander, J. Eatwell, A. Persaud and R. Reoch, Financial Supenision and Crisis Management in the EU (Brussels: European Parliament Economic and Monetary Affairs Committee, 2007), p.39.
96. K. Alexander et al., Financial Supervision and Crisis Management in the EU (Brussels: European Parliament Economic and Monetary Affairs Committee, 2007), p.39.
97. See also CEBS, Annual Report 2006, 5,25-26.
98. K. Alexander et al., Financial Supervision and Crisis Management in the EU (Brussels: European Parliament Economic and Monetary Affairs Committee, 2007), p.39.
99. Decision C(2009)176 establishing the Committee of European Securities Regulators
100. Decision C(2009)177 establishing the Committee of European Banking Supervisors
101. Decision C(2009)l 78 establishing the Committee of European Insurance and Occupational Pensions Supervisors.
102. P. Athanassiou, "The Role of Regulation and Supervision in Crisis Prevention and Management: A Critique of Recent European Reflections" [2009] J.I.B.L.R. 501, 504-5.
103. De Larosière Report (February 2009).
104. De Larosière Report (February 2009) paras 152-162.
105. For example in their oversight duties national supervisors failed to perform to an adequate standard (e.g. Northern Rock, 1KB, Fortis): de Larosiere Report para. 155.
106. Such as the ineffectiveness of embryonic peer review arrangements being developed within the Level 3 Committees: de Larosiere Report para. 156.
107. European Commission, European Financial Supervision COM(2009) 252.
108. European Council, Presidency Conclusions, June 18-19,2009.
109. European Commission, Proposal for a Regulation on Community macro prudential oversight of the financial system and establishing a European Systemic Risk Board COM(2009) 499
110. European Commission, Proposal for a Council Decision entrusting the European Central Bank with specific tasks concerning the functioning of the European Systemic Risk Board COM (2009) 500
111. European Commission, Proposal for a Regulation establishing a European Banking Authority COM(2009) 501
112. European Commission, Proposal for a Regulation establishing a European Insurance and Occupational Pensions Authority COM(2009) 502
113. European Commission, Proposal for a Regulation establishing a European Securities and Markets Authority COM(2009) 503.
114. Regulation (EU) .../2010 of the European Parliament and of the Council on European Union Macro Prudential Oversight of the Financial System and Establishing a European Systemic Risk Board (ESRB Regulation)
115. Regulation (EU).. 72010 of the European Parliament and of the Council Establishing a European Supervisory Authority (European Banking Authority) (EBA Regulation)
116. Regulation (EU) .../2010 of the European Parliament and of the Council Establishing a European Supervisory Authority (European Securities and Markets Authority) (ESMA Regulation)
117. Regulation (EU).. 72010 of the European Parliament and of the Council Establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority) (EIOPA Regulation). The legislative texts were adopted by the Council on November 17,2010. The legislative texts are not yet published in the Official Journal.
118. ESRB Regulation art.4(4)
119. Council Regulation (EU).. 72010 conferring specific tasks upon the European Central Bank concerning the functioning of the European Systemic Risk Board (not yet published in the Official Journal).
120. Generally on the ESAs: Ferran, "Understanding the Shape of the New Institutional Architecture", abstract available at http://ssrn.com/ abstract=1701147 [Accessed November 10,2010].
121. ESRB Regulation art.4.
122. ESRB Regulation art.4(2).
123. ESRB Regulation art.6.
124. ESRB Regulation art.5(l).
125. This matter is to be considered in the three year review provided for in ESRB Regulation art.20.
126. ESRB Regulation art.5(2)-(3).
127. This consideration is also relevant in elections to the Steering Committee, discussed further below.
128. European Financial Services Roundtable, Response (July 2009), paras 40-45.
129. Opinion of the European Central Bank of October 26,2009 (CON/2009/88), para.6.
130. ESRB Regulation art.5(3).
131. ESRB Regulation art.6(l).
132. ESRB Regulation art.6(2).
133. ESRB Regulation art.10. But a majority of two-thirds of the votes is needed to adopt a recommendation or to make a warning or recommendation public: art. 10(3) and art. 18(1).
134. ESRB Regulation art. 10(3). This can be reduced to one-third for extraordinary meetings except meetings involving decisions to make a warning or recommendation public: art. 18(1).
135. ESRB Regulation art.7(l).
136. ESRB Regulation art.7(l).
137. ESRB Regulation art.9(5).
138. ESRB Regulation art.9(4).
139. Treasury Committee, Opinion on Proposals for European Financial Supervision (Sixteenth Report of Session 2008-09) paras 36-39.
140. D.W. Amer and M.W. Taylor, "The Global Financial Crisis and the Financial Stability Board: Hardening the Soft Law of International Financial Regulation?" (2009) 32 University of New South Wales Law Journal 488.
141. Treasury Committee, Opinion on Proposals for European Financial Supervision (Sixteenth Report of Session 2008-09) paras 38-39.
142. European Financial Services Roundtable, Response to the European Commission's Communication on European Financial Supervision (July 2009).
143. G. P. Miller and G. Rosenfeld, "Intellectual Hazard: How Conceptual Biases in Complex Organizations Contributed to the Crisis of 2008" (2010) 33 Harvard Journal of Law & Public Policy 807 (suggesting that the composition of the ESRB could make it vulnerable to the problem of "intellectual hazard").
144. ESRB Regulation art. 12.
145. ESRB Regulation art.4(3).
146. The instruction to have regard for balanced eurozone/non-eurozone representation applies to this election process: ESRB Regulation art.ll(l)(c).
147. ESRB Regulation art. 11.
148. ESRB Regulation art. 13 and art.4(5).
149. ESRB Regulation Recital 24.
150. ESRB Regulation art. 12.
151. 6ESRB Regulation art.l2(l).
152. ESRB Regulation art. 12(3).
153. ESRB Regulation art. 14.
154. ESRB Regulation art.12.
155. European Commission COM(2009) 499.
156. European Commission COM(2009) 499, explanatory memorandum, para.4.
157. European Commission COM(2009) 499, explanatory memorandum, para.4.
158. European Commission COM(2009) 499, explanatory memorandum, para.6.
159. C. Zilioli, "The EU September Package of Reform: A View from the EU Institutions", speech of December 11, 2009.
160. European Commission COM(2009) 499, para.6.1.
161. See generally K. Lenaerts, "Regulating the Regulatory Process: Delegation of Powers in the European Community" (1993) 18 E.L. Rev. 23. The alleged inflexibility of EU law with respect to delegation is questioned in some academic literature but this interpretation appears to be firmly entrenched in the Commission's thinking.
162. See European Commission, The Operating Framework for the European Regulatory Agencies COM(2002) 718
163. European Commission, European Agencies - The Way Forward COM(2008) 135.
164. The possibility of a constitutional challenge cannot be ruled out. From a comparative perspective: Free Enterprise Fund v Public Company Accounting Oversight Board, U.S. Supreme Court, 28 June 2010.
165. e.g. R. Dehousse, "Misfits: EU Law and the Transformation of European Governance", in C. Joerges and R. Dehousse (eds), Good Governance in Europe's Integrated Market, (Oxford: Oxford University Press, 2002), p.207
166. D. Geradin, "The Development of European Regulatory Agencies: Lessons from the American Experience", in D.Geradin, R. Mufioz and N. Petit (eds), Regulation Through Agencies in the EU (Cheltenham: Edward Elgar, 2005),
167. see S. Griller and A. Orator, "Everything Under Control? The 'Way Forward' for European Agencies in the Footsteps of the Meroni Doctrine" (2010) 35 E.L. Rev. 3,20.
168. e.g. it is possible that reference could be made to experience with the much-discussed accountability mechanisms and practices (formal and informal) pertaining to the ECB: F. Amtenbrink, "On the Legitimacy and Democratic Accountability of the European Central Bank: Legal Arrangements and Practical Experiences" in A. Amull and D. Wincott, Accountability and Legitimacy in the European Union (Oxford: Oxford University Press, 2002), Ch.9
169. F. Amtenbrink and K. van Duin, "The European Central Bank Before the European Parliament: Theory and Practice after 10 Years of Monetary Dialogue" (2009) 34 E.L. Rev. 561
170. P. Magnette, "Towards Accountable Independence? The European Central Bank and the Rise of Parliamentary Controls" (2000) 6 E.L.J 326.
171. ESRB Regulation art. 19.
172. Specifically, ESRB Regulation art.20 provides for a review of the Regulation three years after its entry into force.
173. Note ESRB Regulation Recital 6.
174. United Kingdom v European Parliament (Smoke Flavourings) (C-66/04) [2005] E.C.R. 1-10553,[2006] 3 C.M.L.R. 1
175. United Kingdom v European Parliament (ENISA) (C-217/04) [2006] E.C.R. 1-3771,[2006] 3 C.M.L.R. 2.
176. Smoke Flavourings (C-66/04) [2005] E.C.R. 1-10553 at [44]
177. ENISA (C-217/04) [2006] E.C.R. 1-3771 at [42]. G. Borchadt and K. Wellens, "Soft Law in European Community Law" (1989) 14 E.L. Rev. 267, 297. m ENISA (C-217/04) [2006] E.C.R. 1-3771 at [45].
178. ESRB Regulation Recital 30.
179. ESRB Regulation Recital 31.
180. ESRB Regulation art.3(l).
181. ESRB Regulation art.3(2).
182. See further Ferran, "Understanding the Shape of the New Institutional Architecture", abstract available at http://ssrn.com/ abstract=1701147 [Accessed November 10, 2010].
183. EBA Regulation art.23. Compare the U.S. Financial Stability Oversight Council, which will be empowered to identify and designate systemically important non-bank financial institutions.
184. Occasional references to systemic risk can be found in older legislation (e.g. Directive 98/26 on settlement finality in payment and securities settlement systems (Settlement Finality Directive [1998] OJ L166/45) but, historically, there was no express comprehensive legal definition.
185. ENISA (C-217/04) [2006] E.C.R. 1-3771 at [45].
186. Compare the Treasury Committee, Opinion on Proposals for European Financial Supervision (Sixteenth Report of Session 2008-09), paras 29-32.
187. ESRB Regulation Recital 11 (acknowledging past failings in emphasising macro-prudential issues).
188. Smoke Flavourings (C-66/04) [2005] E.C.R. 1-10553 at [45].
189. ENISA (C-217/04) [2006] E.C.R. 1-3771 at [44].
190. Article 352 TFEU (ex art.308 EC) provides an alternative legal basis for the establishment of agencies but the ECJ has said that art.352 may be used as the legal basis for a measure only where no other provision of the Treaty applies: European Parliament v Council of the European Union (C-436/03) [2006] E.C.R. 1-3733
191. [2006] 3 C.M.L.R. 3. The legal basis for the decision to confer secretariat functions on the ECB is art. 127(6) TFEU (ex art. 105(6) EC) (Council power to adopt regulations requiring unanimity).
192. See also ESRB Regulation Recital 31.
193. H.S. Scott, "The Reduction of Systemic Risk in the United States Financial System" (2010) 33 Harvard Journal of Law & Public Policy 671, Pt 1. On the interpretation of "macro-prudential": P. Clement, "The Term 'MacroprudentiaP: Origins and Evolution" (20101) BIS Quarterly Review 59.
194. K. Alexander, R. Dhumale and J. Eatwell, Global Governance of Financial Systems (Oxford: Oxford University Press, 2006), pp.23-26, 184-200.
195. K. Alexander et al., Global Governance of Financial Systems (Oxford: Oxford University Press, 2006), p.24.
196. For an attempt from a legal perspective to provide a working definition of systemic risk see S.L. Schwarcz, "Systemic Risk" (2008) 97 Geo.L.J. 193.
197. International Monetary Fund, Financial Stability Board & Bank for International Settlements. Guidance to Assess the Systemic Importance of Financial Institutions, Markets and Instruments: Initial Considerations- Background Paper: Report to the G-20 Finance Ministers and Central Bank Governors, October 2009.
198. See also A. Anand, "Is Systemic Risk Relevant to Securities Regulation?" University of Toronto Law and Economics WP (2010).
199. A. Sibert, Systemic Risk and the ESRB (Brussels: European Parliament Committee on Economic and Monetary Affairs, 2009) para. 12
200. M.K. Brunnermeier, A. Crockett, C.A. Goodhart, A. Persaud and H.S. Shin, 77je Fundamental Principles of Financial Regulation (London: Centre for Economic Policy Research, 2009), Ch.2
201. O. De Bandt and P. Hartmann, "Systemic Risk: A Survey" (ECB WP No.35, November 2000).
202. On ways of measuring systemic risk see A.W. Lo, "The Feasibility of Systemic Risk Measurement: Written Testimony for the House Financial Services Committee Hearing on Systemic Risk Regulation" (October 19,2009)
203. K. Whelan, "Containing Systemic Risk" (UCD Centre for Economic Research, WP09/27, December 2009).
204. On systemic risk as revealed by the financial crisis: M. Hellwig, "Systemic Risk in the Financial Sector: An Analysis of the Subprime-Mortgage Financial Crisis" (2009) 157 De Economist 129.
205. The absence of a definition of systemic risk in early versions of the legislative text was criticised by the European Economic and Social Committee, which argued that the concept needed to be discussed in public, not just behind
206. ESRB Regulation art.2(c).
207. FSB-IMF-BIS Report, 2.
208. Unger v Bestuur der Bedrijfsvereniging voor Detailhandel en Ambachten (75/63) [1964] E.C.R. 177,[1964] C.M.L.R. 319.
209. L.B. Smaghi, "Macro-prudential Supervision", speech of September 25,2009, suggests that the ECB is already moving in this direction.
210. Written evidence quoted in Treasury Committee, Opinion on Proposals for European Financial Supervision (Sixteenth Report of Session 2008-09), para.37.
211. A. Sibert, Systemic Risk and the ESRB (Brussels: European Parliament Committee on Economic and Monetary Affairs, 2009), para.3.
212. Treasury Committee, Opinion on Proposals for European Financial Supervision (Sixteenth Report of Session 2008-09), paras 36-37, quoting Buiter.
213. Treasury Committee, Opinion on Proposals for European Financial Supervision (Sixteenth Report of Session 2008-09), para.36 quoting Buiter.
214. B. Weder di Mauro and U. Kltih, "Reshaping Systemic Risk Regulation in Europe" (2010) 16 The Brown Journal of World Affairs 179.
215. Weder di Mauro and Kltih, "Reshaping Systemic Risk Regulation in Europe" (2010) 16 The Brown Journal of World Affairs 179.
216. ESRB Regulation art.3(2)(g).
217. See M. Dungey and D. Tambakis, International Financial Contagion: Progress and Challenges (Oxford: Oxford University Press, 2005), Ch.l.
218. Dungey and Tambakis, International Financial Contagion: Progress and Challenges (Oxford: Oxford University Press, 2005), Ch.l.
219. ESRB Regulation Recital 33.
220. e.g. the ECB, Financial Stability Review published on a twice-yearly basis.
221. ECB, Financial Stability Review (June 2010) 137.
222. L.B. Smaghi, "Macro-prudential Supervision", speech of September 25,2009, elaborates on the types of errors the ESRB could make.
223. ESRB Regulation art. 15(3)-(5). The flow is not just one way;the ESRB must also share information with the other authorities: ESRB Regulation art.3(2)(g) and art. 15(1).
224. ESRB Regulation art. 15(2). The Regulations establishing the ESAs contain mirroring provisions requiring the ESAs to co-operate with the ESRB.
225. See, e.g. EBA Regulation Recital 47, art.2(3)-(4), art.8(lXd), art.32 and art.36.
226. ESRB Regulation art.l5(4)-(5).
227. ESRB Regulation art. 16.
228. ESRB Regulation art. 16.
229. ESRB Regulation art. 17(1).
230. Mirroring provisions in the Regulations under which they are established require ESAs that are recipients of ESRB recommendations to act or explain inaction: e.g. EBA Regulation art.36(4).
231. ESRB Regulation art. 17(2).
232. e.g. EBA Regulation art.36(5).
233. e.g. EBA Regulation art.36(5)-(6).
234. ESRB Regulation art. 18. A two-thirds majority of the vote in the General Board, with a quorum of two-thirds of the members, is required for a decision to go public: ESRB Regulation art. 10(3) and art. 18(1).
235. ESRB Regulation art. 17(3).
236. ESRB Regulation art.l9(2).
237. F. Recine and P.G. Teixeira, "The New Financial Stability Architecture in the EU" Paolo Baffi Centre Research Paper No.2009-62.
238. Treasury Committee, Opinion on Proposals for European Financial Supervision (Sixteenth Report of Session 2008-09), para.52.
239. Note the comment by the European Parliament Rapporteur on the ESRB Regulation COM(2009) 499: S. Goulard, "The ESRB does not have any binding power; ultimately, perhaps it needs to go further" Report on COM(2009) 499 (February 2010) 48.