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Financial Supervisory Authority’s principles of international cooperation

Introduction

The Financial Supervisory Authority (FIN-FSA) engages in international cooperation in the fields of regulation and supervision. FIN-FSA is part of the European system set up for the supervision of the financial sector, and it is comprised of three supervisory authorities: the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA). The system also comprises the European Systemic Risk Board (ESRB), operating in conjunction with the European Central Bank, as well as the national supervisory authorities. FIN-FSA also collaborates selectively in global forums.

The FIN-FSA is also member of the Single Supervisory Mechanism (SSM). SSM comprises the European Central Bank (ECB) and the national competent authorities of participating EU countries.

Aims

FIN-FSA’s aims in international cooperation are to:

  • identify risks threatening the Finnish financial market and take pre-emptive supervisory action
  • facilitate effective and consistent supervision within the SSM and the Nordic countries
  • contribute to ensuring that regulation is functional and appropriate for the Finnish financial market
  • promote regulatory and supervisory incentives relating to new financial products and consumer protection and see to it that the guidelines to be applied to the supervision of different sectors’ role in these matters would be as uniform as possible across the EU
  • contribute to the implementation of high-quality supervisory practices throughout the EU, in particular by consolidating collegiate supervision.

Approaches

The FIN-FSA observes the following approaches in its international cooperation:

  • Openness in the preparation of international matters vis-à-vis ministries and stakeholders
  • Risk-based and selective influencing
  • Competent and professional preparation
  • Cooperation based on constructive course of action

Procedures

General

By virtue of section 10, subsection 1, paragraph 3 of the Act on the Financial Supervisory Authority, the board decides on the principles to be observed by the FIN-FSA in international cooperation.

Informing

The Director General informs the board of matters that have come up in international cooperation and presents to the board far-reaching and significant matters of principle. In particular, the Director General brings to the board’s attention matters in which the FIN-FSA’s viewpoint differs from Finland’s official standpoint.

The FIN-FSA, for its part, is responsible for ensuring that communication between domestic authorities (in particular the Ministry of Finance, Ministry of Social Affairs and Health, and the Bank of Finland) remains open and that adequate advance preparation and coordination are in place to safeguard Finland having an effective position of influence in international regulatory cooperation. In addition, the FIN-FSA informs stakeholders, within confidentiality regulations, of any ongoing statute preparation, if the FIN-FSA considers the statute to have a material impact on stakeholder activity.

The FIN-FSA shall also inform, within the bounds of confidentiality regulations, the business sector about matters discussed among supervisory authorities within the EU.

Participation

The board has appointed FIN-FSA’s Director General as FIN-FSA’s representative on the Supervisory Board of SSM. The Director General, or a person appointed by the Director General, represents the FIN-FSA in other international bodies.

Decisions on FIN-FSA participation in any working group activity are subject to the agreed procedures within the FIN-FSA. A person is appointed who is responsible for FIN-FSA’s contribution to the working group. This person is in charge of informing everyone concerned about the progress of work in the group and of ensuring that any FIN-FSA opinions on matters dealt with in the working group are appropriately discussed and defined within the FIN-FSA. More detailed instructions on procedures can be issued in separate internal guidelines.

Independence

According to the Council regulation on the SSM,1 members of the Supervisory Board operate independently and objectively in the interest of the Union as a whole and shall neither seek nor take instructions from the institutions or bodies of the Union, from any government of a Member State or from any other public or private body. Supervisory authorities’ members of the board are bound by corresponding independency requirements stipulated in the regulations on European supervisory authorities.

European System of Financial Supervisors (ESFS)

European supervisory authorities are part of the EU’s system of financial supervision. Their objective is to promote cross-border supervisory cooperation, ensure consistency of supervisory practices, reduce unhealthy competition between supervisors and promote fair and balanced competitive conditions. Supervisory authorities can formulate stand-alone regulations that are binding in nature on member states. They also draw up advice, instructions and recommendations to the European Commission. Alongside cooperation in practical supervision work, supervisory practices among authorities are also being harmonised through supervisory colleges and through benchmark surveys. Cross-sector supervisory and regulatory issues are discussed at the Joint Committee of the European supervisory authorities.

The European Systemic Risk Board (ESRB) is responsible for the macro-prudential oversight of the financial system within the Union. It evaluates systemic risks to financial stability within the EU financial sector. The ESRB comprises national central banks and supervisory authorities.

By virtue of the Act on the Financial Supervisory Authority, FIN-FSA carries out its duties within the ESFS, to the extent that they relate to financial market regulation, in cooperation with the Ministry of Finance, Ministry of Social Affairs and Health and other competent ministries. FIN-FSA must, without delay, inform the ministry responsible for the drafting of legislation on the financial markets and for the functioning of financial markets, of the preparation under way at a European supervisory authority, of any technical standard that might, in FIN-FSA’s opinion, have an impact on Finnish legislation. FIN-FSA must also inform the relevant ministry of any other matter at hand at a European supervisory authority, if FIN-FSA considers it would have an impact on the functioning and stability of the Finnish financial market.

In its own international operations, and based on its own decision-making, FIN-FSA seeks to promote policy definitions relating to supervision and regulation that are consistent with the policy definitions adopted by the Finnish government.

FIN-FSA has made agreements with the Ministry of Finance and Ministry of Social Affairs and Health on the preparation of technical standards regarding the financial sector and on cooperation in any other relevant affairs under way at the European supervisory authorities.

Single Supervisory Mechanism (SSM)

The SSM regulation confers specific tasks on the ECB related to the prudential supervision of credit institutions. Together with national supervisory authorities, the ECB will directly supervise so-called significant credit institutions, and will have an indirect role in the supervision of less significant credit institutions. The primary supervisory responsibility for less significant credit institutions lies with the national competent authorities of participating Member State.

The Supervisory Board of SSM is responsible for drafting policy decisions on supervision and proposals for supervisory decisions. All supervisory decisions are adopted by the ECB’s Governing Council. The SSM will become fully operational in November 2014. The actual supervision work of significant credit institutions will be carried out by supervisory groups, comprised of representatives of the ECB and competent national supervisory authorities. 

Memorandum of Understanding on supervisory cooperation

The FIN-FSA can influence and contribute to the drafting of the Memorandum of Understanding on supervisory cooperation, in order to improve and clarify the supervision of foreign entities’ activities in Finland and of Finnish entities’ activities abroad. It is advisable to draw up agreements that specify the principles of supervisory cooperation in cases where agreements can serve to improve the efficiency and clarity of supervision in comparison with situations where no such agreement exists. Collegiate supervision among multinational groups should be based on a multilateral Memorandum of Understanding on supervisory cooperation. Supervisors also participate in collegiate activities through significant branch offices. Furthermore, in the drawing up of the Memorandum of Understanding on supervisory cooperation, attention needs to be paid to the FIN-FSA’s powers and, in general, the provisions laid out in the Act on the Financial Supervisory Authority should be taken into account, among them section 67 on possible fees charged (or payable).

1) Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions.

11 June 2014

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