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Credit Rating Agencies on the Watch ListAnalysis of European Regulation$

Raquel García Alcubilla and Javier Ruiz del Pozo

Print publication date: 2012

Print ISBN-13: 9780199608867

Published to Oxford Scholarship Online: May 2012

DOI: 10.1093/acprof:oso/9780199608867.001.0001

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(p.266) Appendix 2 ESMA’s Governance Structure and Resources

(p.266) Appendix 2 ESMA’s Governance Structure and Resources

Source:
Credit Rating Agencies on the Watch List
Publisher:
Oxford University Press

(p.266) Appendix 2

ESMA’s Governance Structure and Resources

Governance Structure

There are two main bodies in ESMA’s governance structure: the Board of Supervisors, which brings together the head of the national competent authorities, and the Management Board.

The Board of Supervisors is composed of the heads of 27 EU national authorities and, as observers, a representative of the following organizations: the EC, EBA, EIOPA, and the ESRB. The heads of the competent authorities of Norway, Iceland, and Liechtenstein are also permanent observers.

The main role of the Board of Supervisors is to take all relevant decisions of ESMA, such as decision on the compliance by national competent authorities with community legislation, interpretation of community legislation, decisions in crisis situations, approval of draft technical standards, guidelines, peer reviews, and approval of reports. The Board of Supervisors also takes the final decision on ESMA’s budget.

According to ESMA Regulation, the Board of Supervisors has to meet at least twice a year (in practice, it meets more regularly) and decisions are taken on a simple majority basis for all matters except guidelines and technical standards, where voting is done by qualified majority, as set out under the EU Treaty.

The Management Board is composed of six members selected by the Board of Supervisors among its members. There is also one representative from the EC and the Executive Director attending as non-voting participants. The Management Board focuses on the management aspects of ESMA, such as the development of a multi-annual work programme, the budget, and staff resources.

Budget

ESMA’s revenues consist of a combination of contributions from the national authorities competent for the supervision of financial market participants (that are represented in ESMA’s Board of Supervisors); a subsidy from the budget of the EU; and any fees paid to ESMA in the cases specified in Union law.

ESMA’s main source of funding will come from the EU funds and competent authorities’ contributions. At least in its first year, 40% of the funding for ESMA will come from the Union budget and 60% from its members (that will be allocated according to the weighted voting rights established under the Union Treaties). The costs of implementing the CRA Regulation will be financed via industry fees and levies from 2012.

Human Resources

ESMA has a full-time independent Chair to lead the organization, together with the Executive Director. The Chair is responsible for preparing the work of the Board of Supervisors and chairs both the meetings of the Board of Supervisors and the Managing Board. The Chair is responsible for the accountability of ESMA to the European Parliament, the EU Council, and to the EC. The Executive Director is responsible for preparing (p.267) the work of the Management Board, for implementing the annual work programme, and for managing staff matters.

The day-to-day work in ESMA will be mainly carried out by the Standing Committees established under ESMA that are normally chaired by senior national representatives and bring together the national experts with support from ESMA’s staff. Even in the area of CRAs where all the supervisory powers have been transferred to ESMA, the authority will have to rely heavily on the resources of its members. In fact, national competent authorities still have a key role in relation to CRAs. The national supervisors remain deeply involved in the decision‐making process within ESMA, acting as members of ESMA’s Board of Supervisors, and technical staff participate in internal ESMA panels or committees (Recital 6 of CRA Regulation II).

However, ESMA stills needs to be adequately staffed with its own personnel to ensure that it can discharge its new functions effectively. In this respect, the ESMA Regulation has set some transitional measures to facilitate those people working for ESMA at the end of 2010 to become ESMA’s staff (Article 77). In addition, according to the information published in its website, ESMA intends to increase its staff substantially in the near future. The target is to reach around 120 staff in total in 2014.

The area of CRAs is specially relevant as ESMA will have direct supervisory powers over these entities: ‘it is anticipated that there will be 15 staff dedicated to the supervision of CRAs of which five are currently in place, nine of these will be temporary agents and six will be seconded national experts in 2011’.

ESMA’s staff conditions are regulated, according to Article 68 of ESMA Regulation, by the Staff Regulations, the Conditions of Employment of Other Servants of the European Communities. These rules and Article 70 of ESMA Regulation set the obligation of professional secrecy for ESMA’s staff. In addition, Article 32.1 of CRA Regulation insists on the obligation of professional secrecy that is further broadened to encompass other people besides ESMA’s staff:

The obligation of professional secrecy shall apply to ESMA, the competent authorities, and all persons who work or who have worked for ESMA, for the competent authorities or for any other person to whom ESMA has delegated tasks, including auditors and experts contracted by ESMA. Information covered by professional secrecy shall not be disclosed to another person or authority except where such disclosure is necessary for legal proceedings.