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Banks and insurers are told to pay for new EU watchdogs

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THE European Union could seek to impose new charges on the financial sector to help pay for the raft of new supervisors set up since the crash.

The European Securities and Markets Authority (ESMA), the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) have all been set up since 2008 and receive 60pc of their funding from national supervisors – including the Central Bank here, and the rest from the EU budget.

Under the new plan the new markets, banking and insurance watchdogs could be funded by a levy on the organisations they supervise, in an attempt by the bloc's executive body to save taxpayers' money. The national regulators, who fund 60pc of the costs are funded this way.

The European Commission has been reviewing the watchdogs it launched in 2011 to make supervision of banks, markets and insurers more consistent across its 28 member countries after the 2007-09 financial crisis highlighted failings in the way regulations were enforced.

"Given EU and national budgetary constraints, the Commission considers that a revision of the existing funding model should therefore be envisaged, ideally abolishing EU and national contributions," a draft European Commission report seen by Reuters said.

Staffing and budgets of the three watchdogs are modest compared with regulators in the larger member states, such as Britain's Financial Conduct Authority whose annual budget is £452m. The EBA's budget for 2014 is €33.6m (£26.93m).

However, the welter of EU rules approved to tighten supervision for derivatives, and bank and insurance capital, means the watchdogs will be taking on more responsibilities and will need extra staff and money.

The three watchdogs have about 150-200 staff each and rely on national regulators to help with their workloads.

The Association for Financial Markets in Europe (AFME),, has called for ESMA to have more resources. ESMA is the main regulator for credit rating agencies and trade repositories.

The report did not give any indication of how much the tax on banks and insurers might be, but any levy would likely be applied in proportion to how much supervision is required.

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Eurozone banks will also have to foot the bill for the European Central Bank's new supervisory arm. Banks under its watch will each be asked to contribute up to €15m annually to help cover costs that are set to hit €260b next year.

Member states could welcome the shift to industry-funded watchdogs.

However, Britain's Institute of Directors said it was concerned about any attempt to offload supervision costs on to the industry, which is already paying a levy to UK regulators.

"Abolishing EU and national contributions would send a message that Brussels is willing to expand its oversight powers without being willing to pay for the privilege," the IOD said.


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