ESMA is mandated to take an active role in building a common supervisory culture among national competent authorities to promote sound, efficient, and consistent supervision throughout the European Union. This is known as supervisory convergence. The Supervisory Convergence Standing Committee, which is supported by a permanent working group, helps in the coordination of this work.
Supervisory convergence is the consistent implementation and application of the same rules using similar approaches across the 28 Member States. The purpose of promoting supervisory convergence is to ensure a level playing field of high quality regulation and supervision without regulatory arbitrage or a race to the bottom between Member States. The consistent implementation and application of rules protects investors and ensures orderly markets, and ultimately ensures the safety of the financial system. Supervisory convergence implies sharing best practices and realising efficiency gains for both the national competent authorities and the financial industry.
Supervisory convergence does not mean a one-size fits all approach. It does mean that ESMA will promote the consistent and effective implementation and application of the same rules and using sufficiently similar approaches for similar risks. The overall goal is to strive for comparable regulatory outcomes.
Having focussed much of its effort since its inception on ensuring a complete and appropriate rulebook for the provision of financial services, ESMA has identified Supervisory Convergence as a strategic priority over the coming few years.
Therefore, ESMA will increase its focus on supervisory convergence work, setting priorities and resources accordingly. For this purpose ESMA is developing and will publish a Supervisory Convergence Work Programme in 2016.
This work programme will contribute towards several aims such as the effective implementation of rules, facilitating the exchange of experience between national competent authorities, the coordination of supervisory activity, the development of effective supervisory approaches, the assessment of supervision by national competent authorities through peer reviews, and the identification of barriers to convergent supervision.
Effective supervision of financial markets is a complex task, and currently there is room for increased convergence of supervisory practices and approaches amongst national competent authorities. ESMA will be working with the national competent authorities to improve and to harmonise practices, ensuring the best use of limited resources.
The overall aim is to achieve high, consistent standards of supervision throughout the EU. However full convergence may not be needed in all areas, and limited resources mean that risk-based choices will be used to determine where to prioritise and concentrate efforts.