In light of the failures in supervision exposed by the financial crisis, President Barroso requested a group of experts, chaired by Mr. Jacques de Larosière, to make proposals to strengthen European supervisory arrangements, with the objective of establishing a more efficient, integrated and sustainable European system of supervision.
The Commission brought forward proposals to replace the EU’s existing supervisory architecture with a European system of financial supervisors (ESFS), consisting of three European Supervisory Authorities (ESAs): a European Banking Authority (EBA), a European Securities and Markets Authority (ESMA), and a European Insurance and Occupational Pensions Authority (EIOPA). The three ESAs and a European Systemic Risk Board (ESRB) were established as from January 2011 to replace the previous supervisory committees.
In order to put into action the conclusion of the European Council and Euro Area summit at the end of June 2012, on 12 September 2012 the Commission adopted a set of legislative proposals which led to the creation of the Banking Union composed of a Single Supervisory Mechanism (SSM) and a Single Resolution Mechanism (SRM). The decision to establish the Banking Union is one of the most significant European decisions in the last thirty years.
A new supervisory and resolution architecture, which is effectively multileveled, but governed from the EU level, is being put in place. The design and implementation of the new system place significant demands on the ESAs, the SSM, the SRM, the national supervisory and resolution authorities, the ECB and the European Commission (the Institutional Bodies) and the financial sector in addition to wider systems of governance and accountability.
Agreement on a legal framework is only the beginning of a process that requires institution-building, capacity-building and the development of a coherent European strategy and approach. This is being done in a compressed timeframe. Multileveled systems of regulation and supervision raise complex challenges of coordination, information exchange and consistency across a financial system of considerable heterogeneity. In translating the blueprint from design into day-to-day practice, unforeseen issues will arise and, as the new system unfolds, a considerable amount of learning will be required in order to create in the European Union a “common culture” in Banking and Finance. For credit institutions, there is the need to understand and meet the requirements of a new and unknown supervisory and regulatory system.
To respond to these needs the European University Institute established the Florence School of Banking & Finance to bring together the various constituencies of academics, supervisors, regulators, policy makers, and private stakeholders. The Florence School of Banking & Finance is a truly European forum, built to analyse and discuss the analytical foundation of the new landscape of financial regulation and supervision at the European and national level, and to thus support the development of a common culture of regulation and supervision in the Banking & Finance Sector. While regulation and the new supervisory scheme are the main focus of the School, the constitutional framework, integration and politics at large will form an integral part of the School’s activities.