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SUPERVISION

SUPERVISION

ESMA has direct supervisory powers in two areas: Credit Rating Agencies and Trade Repositories.

Supervision Supervision - ESMA

    ESMA has adopted a risk-based approach to its supervision. Risk-based supervision refers to :

    1. the use of a structured approach to identify the most serious risks at individual supervised entity or industry level; 
    2. ​a targeted review by supervisors to assess how the supervised entities are managing the risks identified; and
    3. the use of available and proportionate measures to reduce and manage these risks.  

    The identification of risks and trends requires continuous monitoring of the periodic information and data provided by the CRAs and through TRs and monitoring of overall market dynamics. In addition, ESMA monitors industry-wide developments through engagement with the supervised entities and other external stakeholders.

    The risk-based dimension allows ESMA to target its supervisory resources to those areas where the greatest risks have been identified, as well as to assess the impact and effectiveness of its supervisory strategy. This allows ESMA to adapt its supervisory approach to the evolving nature of the industry, for example to allow it to launch new investigations or market studies as well as to take ad hoc supervisory measures where necessary to reflect changes in market dynamics and innovations such as new entities, new products, services and delivery channels or new methodologies.

    In the coming years, ESMA intends to enhance effectiveness and lasting impact of its supervisory activities at individual entities, intensify its risk-based approach to supervision, move from functional compliance-desk based approach to a business-based approach and strengthen its reputation through world leading expertise.