Supervisory Cooperation in the Single Market for Financial Services: United in Diversity?

The post-crisis financial services regulatory overhaul, and, particularly, the creation of the European System of Financial Supervision (ESFS) and the Banking Union mechanisms, has increased the complexity of the EU’s financial supervisory architecture. In this new system, financial supervision is carried out by a network of interconnected financial supervisors, with different mandates and subject to various accountability structures, operating at both the Member State and EU levels and bound by a regime of cooperation duties. An efficient cooperation among and within the various levels of this complex supervisory architecture is critical for the good functioning of the EU’s financial system. This paper identifies and analyses key supervisory cooperation challenges in the single market for financial services, and assesses whether the EU legal and regulatory frameworks effectively address them. The paper argues that, despite the advancement of EU financial services integration and supervisory convergence that the post-crisis regulatory overhaul has brought, there are important legal and regulatory obstacles to an efficient supervisory cooperation in the EU; these source, primarily, from the following: first, the lack of clarity and precision of the EU’s regime on supervisory cooperation duties; secondly, the limited applicability of the ESFS’s mediation mechanisms to supervisory cooperation disputes; and, thirdly, the tensions between transnational mandates of financial supervision and national accountability structures and mandates. The paper also examines the threats that Brexit and the EU’s political crisis pose to EU financial integration and supervisory cooperation.