BaFin

Macroprudential supervision

As a special body with no legal personality of its own, the newly-created European Systemic Risk Board (ESRB) is based at the European Central Bank (ECB) in Frankfurt am Main. Even though the ESRB is not part of the ECB, the latter, together with national central banks, will have a leading role to play in it.

The President of the ECB is at the same time also the Chair of the ESRB and represents it. The central decision-making body is the General Board, on which the President and Vice-President of the ECB, the presidents/governors of national central banks, a member of the European Commission, the Chairs of the EBA, EIOPA and ESMA and the Chairs of the Advisory Committees all sit as voting members. Although high-ranking representatives of the competent national supervisory authorities also attend meetings, they, like the President of the Economic and Financial Committee (EFC), are not entitled to vote.

The General Board receives technical support from an Advisory Scientific Committee, an Advisory Technical Committee and a Steering Committee. The ECB provides the Secretariat.

Recognising systemic risks in time

The ESRB’s main function is to monitor macro-economic developments and to avert or contain systemic risks to financial stability in the European Union. For these purposes the ESRB can define, collect and evaluate whatever information it may require. Based on this information, it shall establish and rank systemic risks by priority. If significant risks to financial stability are identified, the ESRB can decide to issue warnings and, if necessary, recommendations for remedial measures.

Both warnings and recommendations may be of a general or a specific nature. They may be addressed to the EU as a whole, to one or more Member States or one or more European or national supervisory authorities. The ESRB can also address recommendations on relevant EU regulations to the European Commission. As a matter of general principle, warnings and recommendations are treated confidentially and are not brought into the public domain. However, the General Board may decide on a case-by-case basis that a warning or recommendation should be made public.

The ESRB cannot compulsorily enforce any warnings and recommendations on those to whom they are addressed. Either measure can be enforced in the face of any possible resistance only by political pressure. To be exact, the institutions to which they have been addressed must notify the ESRB and the Ecofin Council of the measures they have taken to implement the recommendations or provide adequate justification of why they have not implemented a recommendation (“act or explain” mechanism). If the ESRB determines that a recommendation has not been followed or that the institution to which it was addressed has not provided adequate justification for its failure to act, it informs the institution in question, the Ecofin Council and if necessary the European Supervisory Authority concerned, observing the rules of secrecy.

updated on 01.04.2016

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