The Collegial Panopticon? Peer Review as a Tool of EU Financial Supervision

• Department of Law

The EUI European Union Law and the Finance, Innovation and Business Working Groups host a paper presentation by Yane Svetiev, which focuses on an understudied feature of the European Supervisory Agencies in financial regulation: the use of peer review as a mechanism of transnational governance.

The European Securities and Markets Agency, together with the other supervisory agencies, has been granted the competence to perform peer reviews of national supervisors. The ESMA Regulation provides limited guidance on the scope and methodology of peer review, suggesting that this mechanism advances the goal of supervisory convergence by ensuring national implementation of EU rules and standards and through dissemination of identified best regulatory practices.

Tracing the use of peer review in EU supervision across two decades, we find that this mechanism has evolved through frequent, if gradual, changes to its scope and methodology. While original exercises were focused on verifying (even quantitatively) the implementation of rules and standards and adoption of best practices, the review methodology has become more qualitative, focused on understanding the efficacy of local supervision, reasons for divergences, as well as identifying possible improvements. For that purpose, input to peer review exercises has also been gradually expanded, going beyond the expert club of national and EU regulators, to consult impacted market stakeholders to understand the shortcomings in existing regulatory practices and to identify or evaluate proposed solutions. As such, our findings suggest that peer review has evolved from a mechanism of collegial pressure to conform towards one for improving supervisory outcomes. From a legitimacy point of view, we argue that such peer review re-embeds EU regulatory networks into national decision-making.