Brussels,

Regulatory process in financial services​

A dedicated regulatory framework for financial services was initially established following the Lamfalussy report, and subsequently enhanced in response to the financial crisis. This page provides an overview of the level 2 measures within financial services regulation.

Lamfalussy scheme

A specialized regulatory framework for financial services was initially established in 2001 when the EU endorsed the recommendations of the Lamfalussy Report. This report proposed a novel approach to enhance the efficiency and expediency of regulatory processes in financial services.

The Lamfalussy regulatory approach encompassed four distinct institutional levels:

1. Level 1: At this level, the European Parliament and Council would adopt the foundational laws as proposed by the Commission through the traditional co-decision procedure. Recognizing the complexity and protracted nature of this procedure, the Lamfalussy report suggested reserving it primarily for establishing overarching framework principles.

2. Level 2: This stage empowered the Commission to formulate, adjust, and update technical implementing measures with the assistance of consultative bodies predominantly composed of representatives from EU member countries. This approach allowed the Council and Parliament to concentrate on pivotal political decisions, while the precise technical details could be addressed subsequently by the Commission.

3. Level 3: Committees comprised of national supervisors assumed the responsibility of advising the Commission in adopting level 1 and 2 acts and issuing guidance on rule implementation.

4. Level 4: The report advocated for an augmented role for the Commission in overseeing the proper enforcement of EU regulations by national governments.

The four-level regulatory framework endorsed by the Lamfalussy report was initially implemented in the securities sector and subsequently expanded to encompass banking, insurance, occupational pensions, and asset management. This approach facilitated a more adaptable decision-making process and resulted in an enhancement in the quality of legislative measures.

European supervisory authorities

In the aftermath of the financial crisis, the European Union undertook a comprehensive overhaul of its financial supervision framework. This involved the establishment of a fresh entity, the European Systemic Risk Board (ESRB), responsible for overseeing macro-prudential risks.

Additionally, the level 3 Lamfalussy committees underwent a transformation into autonomous authorities endowed with augmented authority.

The result of this restructuring yielded three European supervisory authorities (ESAs), which are as follows:

1. European Banking Authority (EBA)
2. European Securities and Markets Authority (ESMA)
3. European Insurance and Occupational Pensions Authority (EIOPA)
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These authorities have assumed all the functions previously held by the level 3 committees and have been vested with new competencies.

​This includes the duty to formulate what are referred to as 'technical standards'—a specific category of level 2 measures that they craft and submit to the Commission.

Overview table on existing empowerments in basic acts for level 2 measures (2019)