EU Energy Liberalization and Banking Union Framework

EU Energy Market Liberalization Packages

First Package: Directive 96/92 concerning common rules for the internal market in electricity and Directive 98/30 on the internal market of natural gas. Liberalization was to be progressive, applying gradually to different categories of consumers. It introduced a partial opening of national markets to competition; both required liberalization of certain segments of their electricity and gas markets to enlarge.

Second Package: Directives 2003/54 and 2003/55. The liberalization process took place at different speeds in different Member States, aiming at the creation of an internal market. It required national gas and electricity markets to be liberalized for large consumers by 2004 and for all consumers by 2007.

Third Package: Directives on electricity, on gas, security of electricity supply, and regulation on the security of gas. It established an Agency for the Cooperation of Energy Regulators (ACER), defining its mission and tasks, organized in annual work programmes. It complements and regulates the work of national energy regulators.

EU Banking Union and Financial Supervision

1. Characteristics of the Single Supervisory Mechanism (SSM): A dual system of banking supervision with oversight power for both the European Central Bank (ECB) and national banks. The ECB has responsibility for the effectiveness and consistency of the SSM, authorizing and withdrawing authorizations regarding credit institutions, ensuring compliance with EU law, and carrying out supervisory reviews. This dual system of banking supervision requires cooperation between the ECB and national banks.

2. Single Resolution Mechanism (SRM): A mechanism because it involves different agencies. The Regulation Board establishes for the first time common objectives for national resolution authorities to avoid significant effects on financial stability. It encompasses all Member States participating in the SSM. The Council may, under the recommendation of the Commission, initiate a resolution procedure. Based on the Bank Recovery and Resolution Directive (BRRD), the Resolution Board will have broad powers vis-à-vis national authorities.

Institutional Response

The EU supervisory framework comprises the European Systemic Risk Board (ESRB) and the three EU Supervisory Authorities (ESAs):

• European Systemic Risk Board (ESRB): Monitors and assesses potential threats to financial stability that arise from macro-economic developments.
• European Central Bank (ECB): Conducts direct supervision of banks having assets of more than €30 billion, constituting at least 20% of their home country's GDP, or those that have requested direct public financial assistance from the European Financial Stability Facility (EFSF) or the European Stability Mechanism (ESM).
• European Banking Authority (EBA): Based in London, it contributes to the creation of the EU Single Rulebook in banking to provide a single set of harmonized prudential rules for financial institutions throughout the EU, mediating to resolve disagreements between authorities in cross-border situations.
• European Securities and Markets Authority (ESMA): Based in Paris, it assesses risks to investors, markets, and financial stability; completes a single rulebook for EU financial markets; promotes supervisory convergence; and directly supervises specific financial entities.
• European Insurance and Occupational Pensions Authority (EIOPA): Based in Frankfurt.