Accountability between the ESAs and the EU institutions:
an evaluation of the arrangements in practice
MPA Economics & Governance
Elizabeth Pellini
s1945491
Supervisors:
Dr. Anchrit Wille
Dr. Madalina Busuioc
Index
I. Introduction ………. 1
II. Theoretical framework ………...……… 3
1. Evolution of the EU financial landscape from comitology to agencies ……… 3
1.1 Lamfalussy Era ………...………...………..… 3
1.2 De Larosière Era ………...………...………..… 5
2. Challenges in delegating powers to the ESAs ………...………..… 7
3. Accountability: the key tool ………...………...…..… 8
4. Accountability: the assessment framework ………...…...… 10
4.1 Democratic perspective ………...………...…….… 10
4.2 Constitutional perspective ………...………...…….… 11
4.3 Learning perspective ………...………...…….… 11
III. Method and Operationalization ………...……… 12
1. Method ………...………...………...…….… 12
2. Operationalization ………...………..………...…….… 13
3. Sample selected ………...………..………...…….… 14
IV. Analysis ………...………..………...…….… 15
1. Are the accountability arrangements sufficient under democratic perspective? ………...…….… 15
1.1 Provision of information to the principals ……….…..………...…….… 15
1.2 Debate between principals and actors ……….…..………...………...…….… 19
1.3 Incentives for the actors ……….…..………...…….… 20
2. Are the accountability arrangements sufficient under constitutional perspective? ……….…….… 23
2.1 Countervailing powers ……….…..………...……..… 23
2.2 Inquisitive powers ……….…..………...…….… 25
3. Are the accountability arrangements sufficient under learning perspective? ………..……...….… 25
3.1 Feedback ………...………..………...…….… 26
3.2 Feedback discussion ………...………..……… 27
3.3 Lesson learned ………...………..………...…….… 27
V. Conclusion ………...……….……..………...…….… 28
Appendix I: Index of Official Documents and Reports ……….………..… 30
Appendix II: Provision of Information – List of Information Verified ………...… 33
Appendix III: Provision of planning information – EBA ………...………..… 34
Appendix IV: Provision of planning information – EIOPA ………...…...… 35
Appendix V: Provision of planning information – ESMA ………...…...… 36
Appendix VI: Reporting information – EBA ………...………...…...… 37
Appendix VII: Reporting information – EIOPA ………...………...… 38
Appendix VIII: Reporting information – ESMA ………...………...… 39
Appendix IX: List of meetings to which the ECOFIN invited the ESAs ………....… 40
Appendix X: Audits and reviews on ESAs’ accounts and operations ………...… 41
I. Introduction
The interest of most of the worldwide population on the performance of the financial supervisory authorities has increased since the global financial crisis. Some scars have not been completely healed from this disaster that led the world to a recession period. Each country was impacted in distinct levels, some more than others, however against a materialized systemic risk, one common sense prevailed: the financial supervisory framework should be reviewed and strengthened. Hence, the movement to reinvent the supervisory authorities with tighter rules, controls and sanctions then spread all over the world and it was not different in Europe. As a consequence of this process, in 2010, the three authorities responsible for the micro-prudential supervision were introduced, the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA), and the European Insurance and Occupational Pensions Authority (EIOPA), in replacement of the Level 3 Lamfalussy Committees, according to the respective regulations. The new framework, namely European System of Financial Supervision (ESFS) also comprised the authority responsible for the macro-prudential supervision, the European Systemic Board (ESRB), the Joint Committee of the three authorities, responsible for guaranteeing cross-sectoral issues’ alignment, and the National Supervisory Authorities (NSAs) for local supervision at Member States’ level.
The approach in this research is limited to the European Supervisory Authorities (ESAs), three European bodies created in the last European agencification wave, in substitution of the previous advisory Committees of European Supervisors, in order to tackle the financial crisis. Although comitology and agencies have in common the characteristic of providing technical support to decision-makers, in the creation of agencies they were granted with greater autonomy and independence since they were established with legal personality. Before that, the comitology committees used to work under direct influence of the Member States, advising as per instructions (Everson, Majone, Metcalfe and Schout: 1999: 32; Weismann, 2016: 66), but not long ago, the financial crisis has proven that financial stability and consumer protection could not be at the mercy of the interests of privileged groups.
Notwithstanding the relevance of the agencies’ independence in shielding their technical contribution from political interference, a total freedom from controls can trigger bad behaviours, for example, involving negligence, abuse of power, corruption, etc. To avoid these cases, there is ample literature defending accountability as a key system to keep the agencies under control without interfering on their independence (Everson, Majone, Metcalfe and Schout, 1999: 38;
Busuioc, 2010: 224; Weismann, 2016: 68) but, on the other hand, some authors have raised a concern about the missing literature in evaluating the way accountability mechanisms operate in practice (Crum and Curtin, 2015: 2), both at European institutions level (Bovens, Curtin and Hart, 2010: 3) and at European agencies level (Busuioc, 2010: 225). Said that, the opportunity to minimize the literature gap in the field of the financial regulatory and supervisory agencies fuels this study to evaluate the accountability mechanisms in operation and to answer the question:
Are the accountability arrangements sufficient to hold the ESAs accountable for their behaviour?
Accountability is an “umbrella” for a bundle of concepts (Bovens 2007a: 449; Bovens, Schillemans and Hart, 2008: 226-227) but the broad definition of accountability does not fit into the purpose of this study since it cares about virtues such as responsiveness, responsibility, trustworthiness, among other qualities related to good governance, whilst the concern herein is on how the accountability mechanisms operate in practice. In this sense, this study uses the narrow concept, in which accountability is defined as a social relation (Bovens 2007a: 450), as the theoretical foundation to support the design of the assessment framework.
In face of the theoretical framework, this study presents a scheme to assess the accountability arrangements between the ESAs and the EU institutions, and to answer the research question in three strands (democratic, constitutional and learning):
1. Are the accountability arrangements sufficient to enable the European Parliament and the Council to supervise the ESAs and evaluate their conduct as well as to motivate the agencies to adapt their behaviour to suit the preferences of the elected representatives?
2. Are the accountability arrangements sufficient to prevent the abuse of power by the ESAs and in case it happens, to uncover and to apply the necessary sanctions?
3. Are the accountability arrangements sufficient to motivate the ESAs to pursue the improvement of their conduct in order to better reflect the interests of the public?
In the empirical section, this study uses the scheme to evaluate the accountability arrangements in practice through eight features (provision of information, debate, incentives, countervailing powers, inquisitive powers, feedback, feedback discussion and lesson learned), to identify whether they are sufficient to hold the ESAs accountable for their behaviour and to conclude whether they play the accountability function of ensuring democracy.
II. Theoretical framework
This part begins with the presentation of an overview of the EU financial landscape in two moments that characterize the evolution from comitology to agencies, the Lamfalussy Era and the De Larosière Era, respectively. Then, it continues with the explanation of how the financial crisis influenced in the creation of the European Supervisory Authorities (ESAs) with their extended powers, to which includes more autonomy and independence. More power requires more control and the literature presents accountability as a way to ensure that and, in parallel, to preserve the independence of these agencies. Based on the concerns related to the powers given to the ESAs in terms of threat to EU democracy or abuse of power, this chapters presents an accountability assessment framework existing in the literature that is expected to help in answering the questions of this research.
1. Evolution of the EU financial landscape from comitology to agencies
In the aftermath of the euro introduction, it became more evident that the European financial regulatory governance architecture was a burden to the European financial market vis-à-vis the long-time consumed due to lack of harmonized regulation and the insufficient information sharing in the EU legislation process that could compromise the competitiveness (Erdélyi, 2016: 41; Weismann, 2016: 82). The financial market, as a very dynamic sector, especially in securities, during this period was demanding quick actions from the regulators and more interaction of all parties involved in the provision of technical specialized consultations to the Commission regulation proposals (CWM, 2001: 87; Erdélyi, 2016: 41; De Visscher, Maiscocq and Varone, 2008: 19-20).
To tackle this problem, the Economics and Finance Ministers Council (ECOFIN) appointed in mid-2000 the Committee of Wise Men (CWM), a group of experts chaired by Alexandre Lamfalussy, to conduct an assessment on the implementation process of securities regulation and to raise recommendations on how to bring about convergence of rules among the Member States (De Visscher, Maiscocq and Varone, 2008: 20; Weismann, 2016: 81).
1.1 Lamfalussy Era
The CWM proposed the remedy to foster harmonization of securities-related regulations in the so-called Lamfalussy report and it involved changes in the legislative system, distributing it into four
levels, so it could share the powers and prevent power abuse and arbitrary rule, and in parallel, incorporate the expertise of European regulators into the rule-making process without compromising the democratic balance (CWM, 2001: 93-94; De Visscher, Maiscocq and Varone, 2008: 21).
Level 1 refers to the enactment of securities key principles, or as the CWM defines, “the key political choices” documented in legislative texts proposed by the Commission and to be adopted by Council and European Parliament through a co-decision procedure (CWM, 2001: 22).
Then, with the use of comitology procedures within technical committees, Level 2 refers to the process of detailing the way to implement the key principles to which it introduces the European Securities Committee (ESC) comprised of high-level representatives of the Member States, with an essentially regulatory role, and the Committee of European Securities Regulators (CESR) comprised of national regulators, with an advisory role (CWM, 2001: 28; Alford, 2006: 400-2). Describing the legislative process on this level in few words, it contemplates: first, the Commission demands the CESR to provide advice on the technical details of the implementing measure and yet, on this phase, the Commission can be advised by the ESC; then, the Commission prepares a proposal and submits it for voting by the ESC; finally, the ESC has the power to solely decide on the enactment of technical implementing measure (CWM, 2001: 28-9; Weismann, 2016: 82-3).
Level 3 refers to the need to strengthen the cooperation between the national regulators in order to ensure harmonized application of the Level 1 and 2 legislation. To make it happens, at Level 3, the CESR is then responsible for issuing non-binding guidelines and recommendations following joint agreements between the national regulators on the interpretation of the legislations, as well as, for the conduction of peer reviews to guarantee an uniform implementation of the legislations (CWM, 2001: 37; Weismann, 2016: 83; Van Loon, 2018: 252).
Lastly, Level 4 refers to the enforcement of the EU law, having the Commission, as the “guardian of the European Treaties”, the leading responsibility among all the actors, i.e., the European Parliament, Member States, national regulators and private sector (CWM, 2001: 40).
Initially referred to the securities sector, the four-level framework was afterwards extended by the ECOFIN Council to the banking and insurance sector, with the creation of the European Banking Committee (EBC) and the European Insurance and Occupational Pensions Committee (EIOPC), as equivalents to the ESC, as well as the creation of the Committee of European Banking
Supervisors (CEBS) and the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS), as counterparts to the CESR (Quaglia, 2008: 563; Weismann, 2016: 84).
In this four-level approach, what interest this study more is the comitology and the way it, later on, facilitated the emergence of the EU agencies. First, what is the importance of the comitology? As explained in the Level 2, the implementing powers were granted to the Commission because they relied on technical details that the elected representatives could not provide due to the lack of expertise. To balance these powers, the comitology was implemented in such a way that allowed the Member States to control the Commission through a system of committees (Weismann, 2016: 35).
Over time, the transparency and credibility of comitology started to be questioned (Everson, Majone, Metcalfe and Schout, 1999: 54; Weismann, 2016: 46). Among the arguments, although formed by experts, the participants were mostly representatives of the Member States, therefore the comitology committees were susceptible to democratic deficit of the EU since their technical contribution was bounded by political interests (Weismann, 2016: 66). Some other arguments include, neglecting the involvement of the European Parliament (Weismann, 2016: 38), difficulty to track the fundamental reasons of the decisions of the committees (Everson, Majone, Metcalfe and Schout, 1999: 54) and yet, the comitology was not solving the harmonization problem, since the non-binding status had not contributed to the centralization of financial regulation and supervision as allowed the assumption that they “were still exclusively Member State territory” (Chatzimanoli, 2011: 335). With the lack of trust in the comitology and the 2008 financial crisis, it was a matter of time for a new regime to emerge.
1.2 Larosière Era
As the after-effects of the 2008 financial crisis, the global economy and financial system were devasted. The financial crisis had not its origin in Europe but was partly responsible for it and affected by it because insulation is no longer applicable to countries in a globalized economy (De Lavosière, 2009: 59). The report advised “the need for a co-ordinated, global policy response not only in the area of financial regulation and supervision, but also in the macroeconomic and crisis management field” (De Larosière, 2009: 59). Later analyses in the literature have endorsed this understanding and have pointed out the central deficiency. “The first global financial crisis since the Euro’s inception has highlighted the limitations of the decentralized approach to prudential
supervision” (Masciandaro, 2015: 25), “exposed weaknesses in cooperation, coordination, and consistency in the application of Community law, and in the mutual confidence between national supervisors” (Vercher-Moll, 2014: 194) and showed that the posture of “loose cooperation in regulatory matters was no longer sufficient to safeguard the stability of financial markets” (Bajakić and Božina Beroš, 2017: 1744).
In response to the pressure on developing mechanisms to adjust the financial system and the need for expert knowledge, the European Commission assigned the High-Level Group, a group of specialists chaired by Jacques de Larosière which was mostly consisted of former members of European central banks, to evaluate the post-crisis financial system and to present an alternative on how to improve the European financial regulation and supervision framework (De Lavosière, 2009: 3). The conclusions in the De Larosière report comprised an array of supervision problems that contributed to the outbreak of the financial crisis and as recommendation, the group advised on the creation of a new regulatory governance to strengthen the EU financial supervision in order to restore the stability in the financial markets and the trust in the financial system (De Lavosière, 2009: 4).
Substantiated on the core recommendations of the De Larosière report, the Commission proposed to establish, in mid-2009, the so-called European System of Financial Supervisors (ESFS), a new financial regulatory and supervisory framework (OJ L 331, 2010: 12). The system was not significantly modified in its architecture, but the innovations were engaged in fixing the deficiencies in cooperation among national supervisory authorities and convergence of Community law (Levi, 2013: 74). Then, in the end of 2010, the redesigned scheme was established in the form of regulations of the European Parliament and the Council and implemented in early 2011 (OJ L 331, 2010: 12; 20).
The relevant changes consisted in the creation of the European Systemic Risk Board (ESRB) and the replacement of the Level 3 Lamfalussy committees (OJ L 331, 2010: 13-14). In brief words, since the ESRB is not in the scope of this study, this agency was established with the task to supervise the whole financial system (“macro-prudential oversight”) and to prevent the European financial system from the systemic risks as well as to strengthen its capacity to resist to future financial collapse (OJ L 331, 2010: 2). Recapitulating the Level 3 committees, their technical contribution was restricted by the advisory powers, meaning they could only issue non-binding guidelines and recommendations on the implementing measures (CWM, 2001: 37;
Weismann, 2016: 83; Van Loon, 2018: 252). Thus, in the new framework, the Level 3 committees were transformed into three independent supervisory authorities, the European Supervisory Authorities (ESAs), as they are known, with the purpose to carry on the supervision of financial institutions (“micro-prudential oversight”), but nevertheless, with legal personality (European Commission, 2009: 8-9) and significant powers to “make decisions with a direct and binding effect on market participants and national supervisory organizations” (Spendzharova, 2017: 1). To balance these powers, the law establishes that the ESAs have to be accountable to the European Parliament and the Council (OJ L 331, 2010: article 3).
The ESAs were implemented following the already existing sectoral divisions of the Lamfalussy committees (banking, insurance and pensions, and securities) and in accordance to the following legislation (OJ L 331, 2010):
• European Banking Authority (EBA): the successor to the Committee of European Banking Supervisors (CEBS) was established by Regulation (EU) No 1093/2010.
• European Insurance and Occupational Pensions Authority (EIOPA): the successor to the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) was established by Regulation (EU) No 1094/2010.
• European Securities and Markets Authority (ESMA): the successor to the Committee of European Securities Regulators (CESR) was established by Regulation (EU) No 1095/2010. Although the micro-prudential pillar also comprises the Joint Committee of the European Supervisory Authorities (Joint Committee) and the national competent or supervisory authorities (NCAs) of each Member State, these bodies are not scope of this study. Thus, very briefly, the first is responsible for the coordination and accountability of the cross-sectoral issues among the three supervisory authorities according to the preamble of EBA and ESMA Regulations under Paragraph 9 (paragraph 10 EIOPA Regulation), and the latter, according to Article 2(1) of ESAs Regulations, is responsible for the day-to-day supervision of the financial institutions in the Member States (OJ L 331, 2010).
2. Challenges in delegating powers to the ESAs
Comitology and EU agencies have evolved due to the need of technical expertise to support the decision- and rule-making process (Weismann, 2016: 62). However, while comitology committees were not able to separate the political interests of Member States in the application of scientific
knowledge, the ESAs were vested with more independence and autonomy, with the intention to shield them from political interferences (Everson, Majone, Metcalfe and Schout, 1999: 32). However, a total freedom from controls can trigger unwanted behaviours, such as negligence, abuse of power, corruption, and so forth, in particular, because the discretionary powers that were given to the ESAs involve to take individual decisions to deal with breach of Union law, emergency situations, settlement of disagreements between the national authorities (Crum and Curtin, 2015: 11).
Then, how to prevent bad behaviours and still preserve the necessary independence? The literature defends accountability as a key system to monitor and evaluate the agencies’ conduct without interfering on their independence (Everson, Majone, Metcalfe and Schout, 1999: 38; Busuioc, 2010: 224; Weismann, 2016: 68) and still “ensure that the legitimacy of governance remains intact or is increased” (Scholten, 2014a: 7).
3. Accountability: the key system
The literature presents accountability as the key system to keep the EU agencies under control on one side, the ESAs in this case, and on the other hand, to preserve their independence and make sure they are free from political interferences. Said that, what is accountability? Accountability has been conceptualized as a multifaceted term in the prevailing literature of public administration and democracy. Difficult to define in exact words, some authors entitled as “umbrella” (Bovens, 2007a: 449) or “chameleon-like” (Mulgan, 2000: 555) because many concepts have been associated to accountability, but also as “golden” (Bovens, 2007a: 448; Curtin, 2009: 246) or “cornerstone” (Aucoin and Heintzman, 2000: 45) since the term is related to virtuous concepts and therefore, “convey an image of transparency and trustworthiness” (Bovens, 2007a: 448; Curtin, 2009: 246).
Due to its versatile feature, when presented in a broad sense, accountability assessment is very difficult to operationalize because it comprises intangible dimensions which do not hold a common analytical method to be empirically scaled, such as “responsiveness and a sense of responsibility, a willingness to act in a transparent, fair and equitable way” (Bovens, Schillemans and Hart, 2008: 227). In a narrow sense, the line adopted by this paper, the concept presents a more systematic and tangible way to be assessed which also helps the operationalization of this study as it has been defined as “a relationship between an actor and a forum, in which the actor has an obligation to
explain and to justify his or her conduct, the forum can pose questions and pass judgment and the actor may face consequences” (Bovens, 2007a: 450).
When limited to a “social mechanism”, accountability can be characterized as a principal-agent relationship between an agent (or actor) being held to account to a principal (or forum) to whom the account is due, because the first is undertaking the functions of the latter. What comprises the definition of accountability is no longer the conduct of the agent, but the arrangements that hold the agent accountable to the principal (Bovens, 2007a: 450-1; Bovens, 2007b: 106). It is in this ex
post accountability relationship that this study is interested on, to which the literature outlines in
three key stages (Bovens, 2007a: 451-4; Curtin, 2009: 255; Wille, 2016: 696). It is noteworthy to acknowledge that it does not imply that all accountability series will necessarily contain all the stages neither that they will all be executed by the same principals, hence “different forums can play different role in the accountability process” (Wille, 2016: 696).
In starting with the first stage which is a precondition to make the further stages feasible, it comprises the obligation attributed to the actors to provide information according to what was specified by the principals (Bovens, 2007a: 451; Curtin, 2009: 256; Wille, 2016: 696). That obligation can be formal, binding documents which within the EU structure would take the form of, for example, annual reports from the Commission to the Parliament and the Council, or annual reports prepared and submitted by the agencies primarily to the Council and the Commission, and slightly to the Parliament, in the case of newer agencies, and to the public, in the case of information made available through Internet, regarding the activities and performance of the agencies (Curtin, 2009: 257). However, what is the point of providing information if it is left unattended?
The response to the question above leads us to the second stage, the debate (Curtin, 2009: 255; Wille, 2016: 696). It derives from the opportunity given to the actors to explain themselves and justify their actions as per the questions posed by the principals (Bovens, 2007a: 451). As Curtin (2009: 260) examined and exemplified, “this may entail hearing witnesses, questioning representatives of the actors by the accountability forum, proactive investigations etc prior to internal deliberations by the forum itself as to the conclusions it wishes to draw from the facts and information presented to it in various ways”. Thus, the first and second stages can be understood as entailed to Schedler’s (1999: 26) concept of “answerability”, defined as “the obligation of public officials to inform about their activities and to justify them”, and Curtin’s (2009: 258) concept of
“transparency”, after all, not only the provision of information is essential to accountability but also to what extent it is made available.
Lastly, the third stage encompasses the possibility of the forum passing judgment on the behaviour of the actor and imposing sanctions in case of negative judgment (Bovens, 2007a: 451; Curtin, 2009: 271-2; Wille, 2016: 696), “keeping acts of cheating from going unpunished” as it is the purpose of the “enforcement” dimension when the actor violates conduct rules (Schedler, 1999: 16). On the other hand, the judgment can also be positive and with regard to that, there is the possibility to compensate the actor for the achievement. Instead of employing the expression “possibility of sanctions”, “possibility of facing consequences” is a more unbiased expression adopted by Bovens (2007a: 452) who, therefore, gives as examples “fines, disciplinary measures, civil remedies or even penal sanctions”.
4. Accountability: the assessment framework
The good standards and mechanisms of accountability have been discussed in the literature and many types have been derived from this concept (Bovens, 2007a; 2007b; 2010; Busuioc, 2010). However, complex arrangements not necessarily mean they meet accountability’s relevant purpose. Then, which is that purpose?
Bovens explains that public accountability aims “to provide a democratic means to monitor and control government conduct, for preventing the development of concentrations of power, and to enhance the learning capacity and effectiveness of public administration” (Bovens, 2007a: 462). The author derives this conceptualization into three perspectives, democratic, constitutional and learning, which support the analysis of whether the accountability arrangements ensure that the public institutions are performing their tasks in good standards (Bovens, 2007a: 462-4; Bovens, 2007b: 113-5). This is a systematic method to assess the degree of accountability that stands out in the literature focusing on the evaluation of accountability as mechanisms instead of virtue (Bovens, 2007a; 2007b; 2010; Busuioc, 2010; Scholten, 2014b).
4.1 Democratic perspective
From this perspective, the citizens are the most relevant principals of the delegation chain and whereas they delegate their authority to representatives, the latter delegates to an agent who delegates to another agent, and so forth, until the last agent who acts on their behalf. Each agent
who delegated to the next agent is also a principal and “each principal in the chain of delegation seeks to monitor the execution of the delegated public tasks by calling the agent to account. At the end of the accountability chain are the citizens, who pass judgement on the conduct of the government and who indicate their displeasure by voting for other popular representatives” (Bovens, 2007a: 463; Bovens, Schillemans and Hart, 2008: 231).
Thus, accountability emerges as a tool for citizens “control those holding public office” (Bovens, 2007a: 463) and “to force those vested with public power to speak the truth” (Bovens, Schillemans and Hart, 2008: 225). It obliges the agents to give account to the principals (Bovens, 2007a: 451-4; Curtin, 2009: 255; Wille, 2016: 696), however it depends on the strength of the mechanisms in place, which “should enable democratic forums to effectively monitor the exercise of governmental power” (Busuioc, 2010: 39).
4.2 Constitutional perspective
The other reason why accountability is certainly important is related to the constitutional perspective. “The main concern underlying this perspective is that of preventing tyranny by absolute rulers, presumptuous elected leaders, or by an expansive, decentered, perhaps partly ‘privatized’ executive power” (Bovens, Schillemans and Hart, 2008: 231).
Countervailing powers, separation of powers, checks and balances are some of the terms of the mechanisms discussed in the literature to provide the forums with adequate powers to refrain corruption or mismanagement as result of the misbehavior of ambitious public offices (Bovens, Schillemans and Hart, 2008: 232; Curtin, 2009: 50; Busuioc, 2010: 39). It is because “power corrupts its holders and unchecked power corrupts more” that the accountability arrangements aim to offset the misuse of powers and punish when necessary, and thus, “to keep the bastards honest” (Bovens, Schillemans and Hart, 2008: 225; 232).
4.3 Learning perspective
In contrast with the two opposing perspectives above, the learning perspective has more like an advisory aspect. It is not only about ‘keeping the bastards honest’ but about ‘keeping the bastards smart and sharp’” (Bovens, Schillemans and Hart, 2008: 232).
III. Method and operationalization
This chapter presents the scope and tools employed to assess some of the existing arrangements to hold the ESAs accountable. In this sense, it comprises the information about the methodological framework chosen for the research along with the cases, the actors and the time frame selected, as well as the questions to operationalize the three perspectives’ approach employed in the assessment of the accountability relationships.
1. Method
This research makes use of qualitative method to examine in-depth the accountability mechanisms operating to keep the ESAs under control and working efficiently. The case study is the method chosen for this explanatory research of three sister-agencies, supervisory authorities of the European financial system, likely to have quite similar institutional characteristics and accountability relationships with the principals due to the moment and reason of their creation.
However, because this study is interested on the accountability practices of only few cases, the validity and reliability can be compromised as also happens in the small-N comparative designs, for example, that “cannot rely on the law of large numbers to reduce measurement error and filter non-systematic random noise from data by piling up observations” (Toshkov, 2016: 259). To tackle this problem, this research then makes use of within-case analysis in the evaluation of the evidences of each single case in order to, in Toshkov’s words, “complement cross-case inference” with in-depth analysis (2016: 258). The mode of doing this study therefore includes process-tracing in which, as Toshkov explains, “the processes to be traced are causal processes” (2016: 298). Through this mode, it is expected to identify the causal paths linking the cause (fragile accountability arrangements) to the effect (accountability deficit) with a pragmatic picture of the cases.
Due to the limited resources, the data collection focus on the document analysis, essentially written documents like legislations, work programmes, annual reports, auditing review reports, minutes from hearings and meetings, and so on, as per Appendix I. Perhaps, future research could also include interviews to corroborate the findings obtained from the written sources and to contribute to avoid possible biases caused by misleading written evidences.
2. Operatiozalization
This research adopts the three perspectives framework which permits to assess the accountability relationships in an objective way, through the analysis of how the elected representatives monitor and control the ESAs’ way of acting (democratic perspective), by what means corruption and abuse of power are prevented (constitutional perspective) and how the learning process happens and helps to continually improve the effectiveness of the agencies in the fulfilment of their obligations (learning perspective) (Bovens, 2007a; Bovens, Schillemans and Hart, 2008). Hence, the framework offers tangible tools of evaluation with clearly defined questions distributed in eight features (provision of information, debate, incentives, countervailing powers, inquisitive powers, feedback, feedback discussion and lesson learned) to facilitate the operationalization.
Table 1: Method of Assessment – the Three Perspectives
Democratic Perspective
Research sub-question Features Operationalization
Are the accountability arrangements sufficient to enable the European Parliament and the Council to supervise the ESAs and evaluate their conduct as well as to motivate the agencies to adapt their behaviour to suit the preferences of the elected representatives?
(Bovens, Schillemans & Hart, 2008: 231).
provision of information to the
principals
• Have the principals been informed about the conduct of the actors, at the least, accordingly to the frequency formally established?
debate between principals and actors
• Have the actors been questioned by the principals with regard to their conduct whether in compliance to the requirements defined in their mandate?
incentives for the actors
• Do the accountability arrangements motivate the actors to perform their tasks accordingly to the principals’ interests?
Constitutional Perspective
Research sub-question Features Operationalization
Are the accountability arrangements sufficient to prevent the abuse of power by the ESAs and in case it happens, to uncover and to apply the necessary sanctions?
(Bovens, Schillemans & Hart, 2008: 231).
countervailing powers
• Do the accountability arrangements provide sufficient countervailing powers to the principals to curtail the actors' powers when they understand necessary in order to prevent misconduct, corruption, abuse of powers?
inquisitive powers and sanctions
• Do the accountability arrangements provide forums with investigative powers to uncover misconduct of the actors, resulting in sanctions with reasonable punitive impact to make the actors consider that misbehaving does not worth it?
Learning Perspective
Research sub-question Features Operationalization
Are the accountability arrangements sufficient to motivate the ESAs to pursue the improvement of their conduct in order to better reflect the interests of the public?
(Bovens, Schillemans & Hart, 2008: 232).
feedback • Do the actors receive regular and appropriate feedback with regard to their performance?
feedback discussion
• Do the principals and actors have the space and habit to discuss the feedback so they can learn from each other and enhance their behaviour?
lesson learned
• Does the lesson from feedback and discussion 'de facto' produce actions to improve the accountability mechanisms and whether the ESAs ‘de facto’ adopt the lessons and adjust their behaviour according to what the principals have defined?
3. Population selected
The agents that this study has selected comprise the totality of agencies responsible for the micro-prudential supervision of the EU financial system. It comprises three agencies, EBA, EIOPA and ESMA, responsible for the banking, insurance and pensions, and securities sector, respectively.
With regard to the counterpart, many actors play the role of principals and interact with the ESAs in different accountability relationships, however, due to the limited resources, this study restricts the selection of actors to some EU institutions and therefore, other principals (e.g., Joint Committees, national regulators and stakeholders) could be included in a future research. Said that, this study considers the following principals:
- European Parliament (democratic, constitutional and learning) - Council of the European Union (democratic and constitutional) - European Commission (constitutional and learning)
- European Court of Auditors (constitutional and learning)
The period of the analysis varies according to the perspective under analysis. The study aims to cover the period that comprehends the first year of full operation until the reporting year of 2017. Only with regard to the analysis of the feature debate, the evidences comprise the year of 2018 since the discussions correspond to the activities performed in 2017. This study uses qualitative data collected at the website of the EU institutions and ESAs.
IV. Analysis
Are the accountability arrangements sufficient to hold the ESAs accountable? To answer the main research question, this study adopts an assessment framework that evaluates the accountability mechanisms in three directions perspectives: democratic, constitutional and learning.
This study takes accountability as a social relationship and, although the ESAs have an accountability relationship with many different principals, in EU level, national level and also with third parties, the scope herein considers only EU institutions due to limited resources to conduct a broader research. Considering the multi-level governance in which the ESAs are placed, it would be important for a future research to consider all the principals involved.
1. Are the accountability arrangements sufficient under democratic perspective?
If democratic deficit in EU was a concern during the comitology regime due to the political interference of the Member States through the committees, after the agencification in the financial system this concern was not eliminated. In fact, the independence granted to the ESAs which, on one side, shields their work from political influence and prevents the inconsistency over the different governments, on the other hand, raises questions regarding whether their work fits the public demands.
To assess the accountability arrangements under the democratic perspective, this study focus on the relationship between the ESAs, in their role of agents, to the European Parliament and the Council which are their principals. The ESAs have a formal duty before the European Parliament and the Council as established in the article 3 of the mandates (OJ L 331, 2010), and although in the course of ESAs’ activities they give account to other principals, in this part of the analysis the focus is on the accountability arrangements related solely to the elected forums which stand for the voice of the ultimate principal, the public. The next topics cover an assessment of the features: provision of information to the principals, debate between principals and actors, and incentives for the actors.
1.1 Provision of information to the principals
In the evaluation of this feature, the objective is to answer the question: have the European Parliament and the Council been informed about the conduct of the ESAs, at the least, accordingly
to the frequency formally established? It considers the provision of information in two moments, the planning of the activities and the reporting of the performance.
1.1.1 The planning of the activities
The definition of the objectives and goals plays an important role in guiding institutions to achieve a good performance and the presentation of this information to the elected forums shows the commitment of the agencies to the public demands. Besides, the work programme functions as an agreement of shared expectations between the principals and actors and not disclosing it, makes it difficult to track the stage of the progress. In the case of the ESAs, each one gives account of their planning through a document called multi-annual work programme which defines the areas to be prioritized in the forthcoming years and a more detailed document, called annual work programme, which presents the objectives and activities defined for the coming year.
In the planning process, the regulation established that the Management Board is responsible to propose the work programme to Board of Supervisors and there is a deadline for the latter to adopt the documents which shall be before 30 September of each year (OJ L 331, 2010). The following step determines that the Board of Supervisors to transmit the planning to the institutions who have delegated the powers to the agencies, thus, in this case, the documents shall be reported to the European Parliament and the Council, as well as to the Commission and the public (OJ L 331, 2010: Article 43). This is an important accountability arrangement which gives to the principals an opportunity to check in advance whether the plans for the coming years are aligned with the EU public demands and to give an opinion on the work programme, if necessary.
The provision of information allows the principals to verify whether the planning complies to the requirements defined in the mandates which, at the end, they correspond to the public demands, and later on, to monitor whether the activities are performed as agreed in the work programme. This study presents below, the results obtained from the analysis of the ESAs’ work programmes between 2012 and 2017 that were publicly available in the website of the respective agencies (Appendix I). Hence, the sample does not include 2011, the first year of full operation, because these documents were not found available on EBA’s and ESMA’s website.
Table 2: Results of the analysis of the work programmes (details on Appendices II, III, IV and V)
Provision of information of: EBA EIOPA ESMA
planned activities X X X
deliverables X X X
resources management - X X
performance indicators - - -
legal deadline - - -
Source: EBA, EIOPA and ESMA annual reports from 2011 to 2017 (Appendix I)
The results show that, although all the agencies provided the information of the planned activities (e.g. areas of work, strategic goals, core activities, etc) and deliverables details (e.g. operational description, level of priority, most of the occasions also delivery date, etc) for the coming year, in many situations, the date that the document was made available did not comply with the legal deadline which shall be before 30 September of each year. EBA, for example, failed to meet the deadline in one case (i.e. 2012), whilst EIOPA published four work programmes with considerable delay (i.e. 2012, 2015, 2016 and 2017) as well as ESMA (i.e. 2012, 2013, 2015 and 2016). In most of the cases (7 out of 9), the reason of the delays is not publicly justified. If de facto the principals have been receiving the work programmes after the deadline, then, they might not have been having sufficient time to check and pose the appropriate questions to the ESAs, or even to give an opinion on these planning documents.
With regard to the necessary human and financial resources, EBA has not been regularly reporting this information (only in 2013 and 2017) compared to EIOPA and ESMA that have been reporting it on every work programme since 2012. The non-disclosure of how EBA plans to manage the resources through the year is a bad benchmark for the other agencies and is not ideal in terms of accountability practice, creating an unnecessary obstacle for the elected principals to monitor the agency. Similar situation happens in relation to the provision of information about the key performance indicators. This an important information to help the elected principals to evaluate the conduct of the ESAs, however, EBA provided it only in 2017, whilst EIOPA provided it from 2015 to 2017 and ESMA, from 2014 to 2017.
In general, over time, the content of the ESAs’ work programmes has evolved to provide more detailed information and therefore, more transparency. However, the results reinforce the need to improve the controls to ensure this democratic accountability mechanism work effectively.
1.1.2 The reporting of the performance
This study presents below, the results obtained from the analysis of the ESAs’ annual reports between 2011 and 2017 that were publicly available in the website of the respective agencies (Appendix I). EBA, EIOPA and ESMA have been reporting the information about the performed activities such as the achievements, regulatory publications and decisions (i.e., RTS and ITS, guidelines, opinions and recommendations), as well as the have been giving account of the management of human and financial resources to accomplish their functions. In terms of accountability, this is a positive aspect as it provides to the principals the tools to confront the information with the work programmes whether the ESAs performed the activities that were agreed. The same cannot be said about the EBA’s information about the internal controls and results of audits which were not presented in the annual reports of 2016 and 2017, raising suspicion of why non-compliant findings, action plan and follow up on the implementation of recommendations addressed to the agency were not presented in the official reporting document.
With regard to the deadline of the reporting, the regulations establishes that the ESAs must submit an annual report on their activities by 15 June of each year, including the respective Chairperson’s performance, to the Parliament, the Council, the Commission, the Court of Auditors and the European Economic and Social Committee, and besides that, they also have to make the document public (OJ L 331, 2010: Article 43). Unfortunately, this information could not be assessed since the annual reports do not present the issue date.
Table 3: Results of the analysis of the annual reports (details on Appendices II, VI, VII and VIII)
Provision of information of: EBA EIOPA ESMA
performed activities X X X
resources management X X X
internal controls - X X
internal and external audits - X X
legal deadline - - -
1.2 Debate between principals and actors
The debates that this study cares about involves those between the top-level officer of the ESAs and elected principals. Thus, regarding the role performed by the Council to stimulate them, the tiny contribution in terms of demanding account of the ESAs, had already appeared as a finding in the review on the ESAs activities concluded in 2013 by the auditors of the Mazars Group, as per request of the European Parliament’s Committee on Economic and Monetary Affairs (ECON). The review reported that the interaction between the Council and the ESAs was working more in a functional way (Mazars, 2013: 40) and therefore it was recommended to the Council to have a more active approach and to formally invite the ESAs’ Chairpersons to give account on their activities minimally twice a year (Mazars, 2013: 14). The evidences of the meetings between the Council and the ESAs were not found on the website of the Council nor the agencies, a fact that reinforces the finding presented by the Mazars’ report.
Unlike the Council, on the website of the European Parliament, there are evidences of meetings with the EBA, EIOPA and ESMA that dates back to 2014. Hence, the analysis covers the debates that happened between 2014 and 2018, meaning the justification of annual reports from 2013 to 2017 since these documents are issued by June after the reporting year.
Table 4: Figures of the meetings to which the ECON invited the ESAs (details on Appendix IX)
EBA EIOPA ESMA
hearings other meetings hearings other meetings hearings other meetings
2014 1 - 1 - 1 -
2015 2 - 2 - 2 2
2016 1 2 1 2 1 2
2017 2 2 1 1 2 1
2018 1 - 1 - 1 1
Source: Minutes of the ECON meetings with EBA, ESMA and EIOPA from 2014 to 2018 (Appendix I)
The table presents that the Parliament has engaged in annual discussions with Chairperson of the ESAs to discuss the performance of the authorities. The hearings have happened at least once a year since 2014, and in general, between September and October. EBA, EIOPA and ESMA participate together in the meetings which have an average duration of two hours, a short duration, considering the agenda that shall discuss the overall one-year behaviour and performance of three
authorities. Perhaps, an individual meeting after the existing joint annual hearing would give the opportunity to EBA, EIOPA and ESMA to explain and justify to the Parliament, further specific issues of the respective segment. The hearings are not many and the duration not long enough, but nevertheless, it was observed that the Parliament has also invited the ESAs to other meetings, to demand account on regulatory issues such as, for meetings to scrutinize technical standards (delegated acts) and implementing measures as well as for discussions to exchange views on specific regulation, evidences of concern and involvement of the elected representatives in ensuring EU demands prevalence on the policy-making process attributed to the agencies.
1.3 Incentives for the actors
Routine creates comfort zone and comfort zone can hide certain gaps in the accountability system. Then, what does keep all processes running at full steam in the provision of outcomes aligned to the citizens’ needs? Which incentives can help the principals in holding the agents accountable? Many incentives could be discussed as possible accountability instruments, but this study has opted for a limited review, therefore, the focus comprises three pillar incentives (structural, operational and performance) in which their effectiveness depends on the intervention the elected principals either in the definition of the rules or monitoring the performance. The documents that supported this analysis comprises the mandates of the ESAs and the result of the reviews conducted by the IMF in 2013 and by the European Commission in 2014, and the impact assessments performed by the European Parliament and the European Commission in 2017 (see Appendix I).
1.3.1 Governance structure
In starting with the governance structure of the ESAs which presents the same structure for the three bodies, it was observed that the composition of the boards and voting design have not been incentivizing the agencies to work in favour of the EU interests. In the Board of Supervisors, the voting members comprises only the heads of the NCAs of Member States “who have to combine their mandate within the ESA with their national mandate as heads of national CAs” (European Commission, 2017b: 45). In the Article 42 of the ESAs Regulations, it is stated that the independency shall predominate over national interests, but it seems difficult to avoid conflict of interests when powers are given to non-impartial members whilst the Chairperson, who is the “full-time independent professional” (OJ L 331, 2010: Article 48), does not have voting rights. Even in
a more operational level like in the Management Board where the Chairperson is a voting member, the independence is compromised because the other six members are also members of the Board of Supervisors (European Commission, 2017b: 44-45), therefore the only neutral decision in this board can be easily outvoted.
Not surprisingly, in the impact assessment conducted by the Commission in 2017, it was reported that the ESAs have not been exercising the powers properly when entailing unfavorable direct effects on the NCAs like in the case of breach of Union law and settlement of disagreements between NCAs (European Commission, 2017b: 49). Previous review of the Commission on the performance of the ESAs pointed out that the agencies were, instead, making use of “non-binding mediation powers and moral suasion” to address the issues regarding non-adherence to the EU law and dispute settlement (European Commission, 2014: 7).
The current governance architecture threatens the democratic perspective due to the influence of stronger Member States that may put the national interests first and has a disincentive effect on the prioritization of the European interests. This weakness has been reported by different forums (international and European institutions) concerned with the independence and accountability of the ESAs (IMF, 2013: 11; European Commission, 2017b: 45; European Parliament, 2017: 2). The Board of Supervisors also has five non-voting members (representatives of the European Commission, the European Central Bank, the ESRB and each of the other two ESAs), however their role as observers does not appear to be sufficient to inhibit biased decisions taken by the voting members. Hence, what the evidences show is that the governance structure is fragile and susceptible to be captured by the national interests.
To tackle the threat to democracy caused by the vulnerable governance structure, the Commission has recently proposed amendments which involves the creation of Executive Boards comprising the Chairperson of the ESAs and independent full-time members, in replacement of the Management Boards and with wider powers (European Commission, 2017c: 22-23). This proposal presents changes that strengthen the accountability regime when it shifts non-regulatory decision-making powers such as “dispute settlements, breach of Union law matters and independent reviews [of the NCAs]” (European Commission, 2017c: 23), from national authorities to full-time dedicated professionals to prevent the national-oriented approach in these decisions. Besides, although the Chairperson will have enhanced powers, sharing them with the others
independent voting members helps to prevent the concentration of power problem and the perception that the national interests are put first before EU interests.
1.3.2 Funding sources
Budget is another accountability tool that can provide incentives for the ESAs to carry out their tasks in an efficient way, as expected by the elected representatives. The Article 62 of the ESAs Regulations defines the sources of their revenues, a combination of contributions from the NCAs, subsidy from the EU and any fees paid to the ESAs in the cases specified in the Union law (OJ L 331, 2010).
The Commission’s impact assessment estimates the following distribution: 60% originating from NCAs and 40% from the General EU Budget, with the exception of ESMA that, besides these contributions, is also funded by private companies that it supervises, such as credit rating agencies (European Commission, 2017b: 149). According to this distribution, it appears that the national interests may produce pressure over the work of the ESAs since they represent the majority of source’s revenue. If considered the direct influence of the heads of national authorities in the governance structure, the budget that should work as an incentive in the accountability regime, enabling conditions for the ESAs to account for their actions, might become a power game in which only stronger Member States win. To tackle this weakness, in the assessment report the Commission proposed to replace the funding originated from the NCAs with private sector contributions instead (European Commission, 2017c: 24-25).
1.3.3 Performance monitoring – Key performance indicators
In the analysis of the provision of the planning information, it was observed that the ESAs have developed key performed indicators (KPIs) to support the monitoring of their performance. The first KPIs were introduced by ESMA in 2014, whilst EIOPA in 2015 and lastly, EBA in 2017. The performance indicator is an effective incentive because it provides a way to measure the activities and to assess the performance with more objectivity and accuracy, therefore providing more transparency to the assessment of the ESAs. On the other hand, in the analysis of the annual reports, it was observed that only EIOPA has been providing detailed information with regard to the achievement results of the indicators since 2015, whilst ESMA provided only in 2017 and so far, EBA has not been informing these measurements.
These results show that the principals should push the actors to report their performance and to explain the reasons the goals were not achieved, otherwise, the actors will not feel motivated to accomplish the tasks.
2. Are the accountability arrangements sufficient under constitutional perspective?
This part of the analysis is concerned about assessing the countervailing powers and inquisitive powers in practice to prevent the corruption and abuse of authority.
2.1 Countervailing powers
In terms of countervail the power of the ESAs, it was observed that regarding to the most relevant issues the Board of Supervisors does not have the authority to take individual decisions without previous scrutiny by the forums. From the analysis of the procedures described in the ESAs mandates, it was observed that to important powers of the ESAs such as the appointment and dismissal of the Chairperson and the policy-making powers, there were countervailing powers to hold the authorities to the boundaries of their role. The analysis was conducted based on the mandate of the ESAs.
2.1.1 Countervailing powers in the admission and dismissal processes
As in the case of the Article 48 of the ESAs Regulations (OJ L 331, 2010), in which, although it empowers the Board of Supervisors to select the Chairperson, the Parliament may object to this designation and the removal also depends on the elected principal’s acceptance following the decision of the Board of Supervisors. The Chairperson shall be independent to provide statements and answer the questions free of vices. This countervailing process, where the appointment and dismissal are valid only after the confirmation of the European Parliament, aims to ensure that the decision was based not on national, but on EU interests.
2.1.2 Countervailing powers in the policy-making process
Regulatory Technical Standards (RTS) and the Implementing Technical Standards (ITS) The ESAs’ policy-making powers are subject to a more complex scrutiny mechanism involving a combination of various powers to control the delegated power. According to the mandates (OJ L 331, 2010: Articles 10-15), the elected representatives have entrusted the ESAs with the
elaboration of the RTS and the ITS because the agencies have technical expertise that it lacks legislative institutions.
The countervailing powers in this policy-making process firstly involves non-governmental parties’ contributions through open public consultations to asses cost and benefits as well as the opinion of the Stakeholder Group before the document is submitted to the Commission and forward to the Parliament and Council. Secondly, the RTS and ITS only have binding effects if they have been endorsed by the Commission, as this institution has been empowered to adopt the standards by means of delegated acts (OJ C 326, 2012: Article 290), and still, the document may be endorsed in part or with amendments, or may be rejected (OJ L 331, 2010: Article 10). Not enough, one last control comprises the power of the Parliament or the Council to object to RTS or ITS after they have been adopted by the Commission (OJ L 331, 2010: Article 13).
Guidelines and Recommendations
In a shorter process, but yet under the examination of different forums, the issuing of guidelines and recommendations requires previous conduction of public consultations and opinion of the Stakeholder Group, although in this case, the Parliament, the Council and the Commission are only informed about the guidelines and recommendation when the NCA has not complied with them (OJ L 331, 2010: Article 16). The contribution of the forums is less intrusive however still helps to place limits on the use of power and to keep corruption away. When the NCA refuses to comply to the guidelines and recommendations, it has to justify its reasons and this information is reported to the principals in the annual report. Among the reasons to not comply, the NCA may raise an alert to the forums (e.g. potential corruption) and allege that the ESA is making inappropriately use of the rules to favour financial institutions of certain Member States in detriment of others.
In both cases, the drafting of RTS and ITS or the issuing of guidelines and recommendations, the accountability system is strengthened by the checks and balances performed by different forums, particularly because, although the ESAs have the technical expertise in the respective segments, they are not legislative bodies. Hence, having consumer and market representatives and democratically legitimized principals as part of the policy-making process, it contributes to hold the authorities to the boundaries of their role.
2.2 Inquisitive powers
The accountability arrangements may help to reduce the concentration of power but not always the accountability tools in place are sufficient to prevent the abuse of authority and corruption. Public officers may discover ways to escape the controls and irregularly exceed in the use of public power. So, who shall be the responsible for revealing the misconduct and call the actors to repair it?
2.2.1 Inquisitive powers in audit processes
The operational part of the uncovering process relies on the areas of audits. From the analysis of the annual reports, it was observed several audits been conducted by the European Court of Auditors (ECA), on the annual accounts and budgets, and by the Internal Audit Services (IAS) of the Commission, on the operations of the ESAs (Appendix X).
In the use of the inquisitive power, which is a feature of the control areas, the processes of questioning the deviations and passing judgement are the central routine, and depending on the results, it may lead to the issuing of recommendations. Although these forums have not imposed penalties, but only made recommendations to repair the findings, the results of the audits and complaints’ treatment are reported to the EU level through the annual reports and the elected principals have the powers to impose the sanctions. The Parliament and the Council do not have many types of direct sanctions at their disposal, but the impact of the one they have, the dismissal of the Chairperson (OJ L 331, 2010: Article 48), is sufficiently strong to make the path to misconduct less attractive.
3. Are the accountability arrangements sufficient under learning perspective?
The analysis takes into account whether the accountability arrangements provide a learning platform for the ESAs, along with the European Parliament, the Council, the Commission and the European Court of Auditors, to reflect on how to improve the effectiveness and efficiency of the authorities. In order to assess the amplitude of the inducements that affect the process of keeping the ESAs effective in accomplishing their tasks, the analysis covers the period from the implementation of the ESAs in 2011 to 2017 which refers to year discussed in the last annual hearing.
From the learning dimension, time is a necessary component in the process of building, mellowing and evaluating the knowledge, and that is why the timeframe defined for the analysis covers almost entire existence period of the ESAs. It refers to approximately eight years what it is not such a long period when considering the duration of the Chairperson’s and Executive Director’s term of office that shall last five years having the possibility to be extended once, as established by the ESAs’ regulation (OJ L 331, 2010). In that sense, this part of the analysis seeks to evaluate whether the accountability inducements in place have worked to promote learning exchanges between the principals and the actors, and to deliver desirable outcomes in a more effective and efficient way.
3.1 Feedback
Feedback as an accountability tool allows the public bodies to learn from mistakes and to adjust their behaviour to deliver the expected performance. The importance of the feedback as an accountability mechanism is already embodied within Article 81 of respective ESA Regulations (OJ L 331, 2010). The legislation sets out the terms of the report on the operations of the ESAs and requires the Commission to conduct the first review in 2014 and every three years thereafter, to make the results public and to forward the report to the European Parliament and the Council (OJ L 331, 2010). Although the demanded report is not primarily addressed to the actors, the legal requirement for cyclical reviews and then results to be disclosed to the most relevant principals (the public, the European Parliament and the Council) signalizes to the ESAs that they are critically monitored.
This study presents on the table, the figures of audits and reviews on ESAs’ accounts and operations between 2012 and 2017, that were publicly available in the website of the respective agencies (Appendix I). From the evidences, it can be concluded that, not only the European Commission (EC) has so far complied with the legal requirements, but the European Parliament (EP) and the European Court of Auditors (ECA) and the Internal Audit Services (IAS) of Commission have also conducted parallel assessments.
Table 5: Figures of audits and reviews on ESAs’ accounts and operations (details on Appendix X)
EBA EIOPA ESMA
annual accounts operations annual accounts operations annual accounts operations
2011 1 (ECA) - - - - -
2012 1 (ECA) 1 (EC) 1 (ECA) 1 (EC) 1 (ECA) -
2013 1 (ECA) 2 (1 EP / 1 EC) 1 (ECA) 2 (1 EP / 1 EC) 1 (ECA) 2 (1 EP / 1 EC) 2014 1 (ECA) 2 (EC) 1 (ECA) 2 (EC) 1 (ECA) 2 (EC) 2015 1 (ECA) 1 (EC) 1 (ECA) 1 (EC) 1 (ECA) 1 (EC)
2016 - - 1 (ECA) 1 (EC) 1 (ECA) 1 (EC)
2017 - 2 (1 EP / 1 EC) 1 (ECA) 3 (1 EP / 2 EC) 1 (ECA) 3 (1 EP / 2 EC)
Source: EBA, EIOPA and ESMA annual reports from 2011 to 2017 (Appendix I)
3.2 Feedback discussion
In the reviews, in general it has been given positive considerations related to ESAs progress after all, significant deliveries were made in a short lifetime and with modest resources. The results of the reviews are also published in the annual reports and therefore, the feedback discussions appear to happen in the debate stage.
3.3 Lesson learned
The creation of the ESAs involves a complex combination of Union regulations to justify their powers. Perhaps because of this complexity, problems reported already in the first review took years to the lessons finally be learned and promote actions for adjustments in the accountability system. This is the case of the governance design which gives voting rights only to non-elected representatives of the national authorities and does not give the same power to the Chairperson who is an independent professional.
