Decisions about regulatory policy and practice should be based on sound analysis. ESMA conducts open public consultations on draft implementing technical standards and analyses the potential related costs and benefits, unless such consultations and analyses are disproportionate in relation to the scope and impact of the draft implementing technical standards concerned or in relation to the particular urgency of the matter. Cost-Benefit-Analysis (CBA) / Impact Assessment (IA) are a key tool in this regard. CBA/IA draws on economics to provide an analytical framework that ensures that policy proposals are justified in terms of a proper understanding of the nature of perceived problems.
As a disciplined approach it helps to identify the past or likely future effects of regulation and supervision on markets and, ensuring engagement with all affected parties, helps policy makers and stakeholders alike develop an appreciation of the respective (dis)advantages of previous policy responses and proposed policy options. In this way, it provides new information that can help policy makers to describe and explain the decision making process and thereby improves the way in which the most effective policies are identified, chosen and implemented. Moreover, through its formal and informal consultation procedures, CBA/IA makes regulatory policy more transparent and thus can help to make the European Supervisory Authorities (ESAs) – EBA, EIOPA, and ESMA - more accountable. It is also a means of communication between the ESAs, the different national regulators involved, the regulated firms and other affected or interested parties.
The three ESAs have produced common Cost-benefit / Impact Assessment Guidelines to help achieving this.