CESR becomes ESMA 2015. 11. 6.¢ CESR delivering its objectives in 2010 40 3.1 Market...
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CESR ANNUAL REPORT 2010
CESR becomes ESMA
CESR delivering its objectives in 2010 40 3.1 Market integrity, transparency and efficiency 41 3.2 Convergence 70 3.3 Investor protection 92 3.4 Technical advice and reporting to EU institutions, implementation of EU roadmaps 101
Looking ahead: ESMA in 2011 104 4.1 Key priorities: ESMA’s draft Work Programme 2011 105 4.2 Ad hoc work streams 106 4.3 On-going work in 2010 106
Appendix 110 5.1 Financial statements 111 5.2 CESR Secretariat 112 5.3 List of CESR Members 114
CESR’s achievements in 2010 20 2.1 From CESR to ESMA 21 2.2 Key achievements and priorities in 2010 23 2.3 CESR’s objectives 25 2.4 CESR's standing committees, groups, networks and panels 25
Securities markets in 2010: trends and risks 8
Foreword by the Chairman
2010 was again a challenging year: for financial institutions, regulators and for the Committee as well. It was also a significant year as it marked the last year of CESR’s existence. By the time you read these words, CESR will have been replaced, after nine years of existence, by ESMA, the European Securities and Markets Authority. However, it is not with regret that I present this last annual report of CESR. The evolution of the legal status of the Committee to an EU institution with further powers to foster regulatory and supervisory convergence and co-operation in Europe was an old ambition of our Members. As such, the fruitful and important work which started under this Committee will not only continue under ESMA, but it will be taken to a whole new level, with even greater authority. The establishment of ESMA will mark a historic junction in the financial supervision in Europe. At the time this report is published, three European Supervisory Authorities for markets, banking and insurance will have been created as well as, for a first time, a pan-European Systemic Risk Board. These new bodies combined will form the new European System of Financial Supervision which is aimed at ensuring more stable financial markets where investors can enjoy the
same level of protection wherever they go in Europe. CESR’s successor, ESMA, will play a vital role in this new architecture.
In order to ensure CESR’s readiness to become ESMA, 2010 saw a lot of internal preparatory work in terms of organisation, but also in terms of policy. CESR reviewed its internal organisation and started designing future policies and procedures for ESMA. In its policy advice to the European Commission, CESR included recommendations on how to best prepare ESMA’s role in the different pieces of legislation that make up the EU framework for securities supervision in Europe.
That said, 2010 was indeed a challenging year: CESR worked hard on finalising advice on a great variety of policy issues stemming from work already started earlier or directly following up on issues that have arisen during or after the financial crisis.
A key area for CESR was to continue the implementation of the EU Regulation on Credit Rating Agencies. CESR laid the groundwork for the key role ESMA will have in this respect. Different types of guidance were put forward that are aimed at explaining and facilitating both regulators and those being regulated to properly comply with the new rules. 2010 even saw an important step forward in this respect with the registration of the first Credit Rating Agency in Europe; further applications are currently being processed. CESR also started building a central repository for ratings and, overall, found the U.S. and Japanese supervisory regimes for rating agencies equivalent to EU rules. All these were important steps towards a direct supervision of credit rating agencies by ESMA. The ongoing financial crisis revealed the role CRAs play in contributing to market integrity. CESR prepared the ground for an effective regulation in Europe so as to ensure the rating process becomes more transparent and investors are protected properly.
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Foreword by the Chairman
Of course, the CRA Regulation was not the only important policy area on which CESR contributed in 2010: there was also considerable work undertaken on another cornerstone of Europe’s securities markets legislation, the MiFID, the Directive which was reviewed, provides the regulatory framework for trading in European financial instruments. In 2010, CESR published two sets of advice recommending the European Commission to overhaul the Directive’s legal framework in order to adapt to changed market realities. This work of the Committee represented the results of two years of continuous fact-finding and of assessing the impacts of MiFID on securities markets. CESR identified those areas where amendments and changes to the legal framework might be needed. Overall, MiFID increased market competition by opening up the field to other trading venues than exchanges, which in of itself is a very good thing. There are, however, some diverse consequences, such as an increased opacity and fragmentation in trading data. The new MiFID II framework will seek to address these issues.
Not only were the rules governing the actual trading a key focus for CESR in 2010, but also on post-trading issues, 2010 was a demanding year for CESR. Following the regulatory roadmap laid out by the G20 in 2010, a proposal for a regulation on OTC derivatives an area still largely unregulated, CCPs and trade repositories was adopted by the European Commission. CESR started preparatory work for future technical standards as such responsibility is expected to be assigned to ESMA.
Another area of continued work in 2010 was the regulation of the fund industry, the so-called UCITS. Following CESR’s advice on the implementing measures of the revised UCITS Directive in 2009, in 2010, CESR’s focus was more on giving a common EU definition of money market funds, the risk measurement of UCITS generally, and elaborating further the requirements on Key Investor Information (KID). The KID document will replace the
Simplified Prospectus soon, facilitating investors’ investment decisions and ensuring consistency of information across Europe. Generally, making financial information easier to understand has always been an important part of CESR’s agenda. In this regard, the implementation of the KID will be an important step forward in setting a new benchmark for effective retail investor information. In addition, CESR also worked to improve financial information by monitoring and ensuring CESR’s advice was heard in the international financial reporting community, in particular regarding accounting standards for financial instruments.
As much as consistency of rules for securities across Europe is important, it is also crucial for rules across the different financial sectors to converge. The more integrated and innovative banking, securities and insurance conglomerates get, the more regulators have to work together on these issues. This was well reflected by the increase in joint work on cross-sector issues at the level three sector Committees, CESR, CEBS and CEIOPS, in 2010. The set-up of the new European supervisory architecture will formalize this co-operation even further. The new supervisory structure seeks to establish a common EU rule book, but also to put in place a real common supervisory culture.
Finally, I also would like to take this opportunity to thank all the individuals, and they are numerous, that contributed to a successful 2010 for CESR. My thanks go to my colleague supervisors from the Member States, to the technical experts working on all the policy issues mentioned, and of course to all of CESR’s staff led by the Secretary General, Carlo Comporti. Without the joint effort and the continuous commitment of each and everybody, CESR could not have achieved so much and this has established a solid foundation for ESMA to now build even more intensively on.
Carlos Tavares, Chairman of CESR.
List of commonly used acronyms
EEA European Economic Area
EECS European Enforcers’ Co-ordination Sessions
EFC Economic and Financial Committee
EFCC European Financial Conglomerates Committee
EFRAG European Financial Reporting Advisory Group
EIOPA European Insurance and Occupational Pensions Authority
EMIR European Market Infrastructure Regulation
EP European Parliament
ERGEG European Regulators’ Group for Energy and Gas
ESRB European Systemic Risk Board
EU European Union
ESAs European Supervisory Authorities
ESC European Securities Committee
ESCB European System of Central Banks
ESFS European System of Financial Supervision
ESMA European Securities and Markets Authority
ESME European Commission’s European Securities Markets Standing Committee
FASB Financial Accounting Standards Board
FCD Financial Conglomerates Directive
FESE Federation of European Stock Exchanges
FICOD Financial Conglomerates Directive
FSC Financial Services Committee
FSB Financial Stability Board
FST Financial Stability Table
AII Alternative Instrument Identifier
AIFMD Alternative Fund Managers Directive
AMLTF Anti-Money Laundering Task Force
AUM Assets Under Management
ARC Accounting Regulatory Committee
AuRC Auditing Regulatory Committee
CCP Central Counterparty Cl