Will the future of financial services be green, clean and digital? What are the challenges and opportunities of more financial supervision at the European level, given the unique two-pillar structure of the European Economic Area (EEA)?
These were among the questions explored at a conference hosted by the European Free Trade Association (EFTA) and the EFTA Surveillance Authority (ESA) on 9 November 2022 at the EFTA House in Brussels. The conference brought together 150 policymakers, supervisors, and other high-level financial services professionals in the EEA.
Many speakers highlighted the challenge of greenwashing in financial services when discussing the transition to a greener and digital sector. The climate-finance expert and CEO of CICERO Shades of Green, Harald Francke Lund, stressed that “climate risk has become a clear financial risk” and explained how CICERO’s shades of green methodology can be used as one of the ways to combat greenwashing. Mr Francke Lund explained “Our methodology provides a nuanced and yet digestible assessment for investors by acknowledging that 'green' is not binary and that all shades of green are necessary to successfully achieve the Paris agreement”.
CICERO’s methodology provides a nuanced taxonomy for investors to assess projects and solutions
These themes were further explored by a panel of senior civil servants and finance executives. The Deputy Governor for Financial Supervision of the Central Bank of Iceland, Unnur Gunnarsdottir, highlighted the challenges supervisory authorities face when it comes to greenwashing, as financial services are rapidly changing from the classic holistic services of banks into smaller companies providing fragments of the services. “This means that it is even more complicated than before to monitor in the micro-sense what the sector is up to”, she said.
In her keynote address, Mairead McGuinness, European Commissioner for Financial Stability, Financial Services and the Capital Markets Union, highlighted the strong and successful cooperation between the EEA EFTA States and the EU, and referring to the Internal Market, she stressed “We should be very proud of what we built”. Sustainable finance is one of the areas where the cooperation is particularly close. “By directing private money to the green transition, sustainable finance can make a real difference”, she emphasised.
Mairead McGuinness, European Commissioner for Financial Stability, Financial Services and the Capital Markets Union
The good cooperation between the EEA EFTA States and the EU was reiterated by Verena Ross, Chair of the European Securities and Markets Authority (ESMA). At the same time, she pointed to the challenges that can arise due to the unique two-pillar structure of the EEA. While this structure is crucial to the way the EU and the EEA work together, it can also cause challenges she said. “Where timelines for the incorporation of EU law into the agreement are too long, these risk creating distortions and regulatory arbitrage potentially and suddenly endanger the level playing field within the single market”, she said.
As part of his Keynote Address, Stefan Barriga, College Member of the EFTA Surveillance Authority (ESA), discussed the role and challenges of ESA as the European Financial Supervisor for the EEA EFTA States. Barriga emphasised that ESA's traditional surveillance role is the cornerstone of its work in financial services. "It is indispensable for the implementation of the concept of one market, two pillars", he said. The EEA Agreement relies on mutual trust that both sides will fully enforce common legal standards to achieve maximum homogeneity. However, the growing complexity of law is a major challenge for the smaller side and for our institutions. In spite of this, ESA has the three ingredients needed to fulfil its mandate: "Independence, expertise and cooperation".
During the second panel, high-level experts representing the EU legislator, the EU Supervisory Authorities (ESAs), the National Supervisory Authorities, and the EFTA Surveillance Authority shared their perspectives on the two-pillar solution. The panellists stated clearly that the current structure – which includes EU ESAs and the EFTA Surveillance Authority – allows for greater cooperation between the pillars than previously possible, especially with National Supervisory Authorities involved. Goodwill and pragmatism are essential to the two-pillar structure's success. The panel also emphasised the importance of providing a platform for continued discussion on the topic at events such as the Conference on the Future of Financial Services in the EEA.
Missed the conference but interested in learning more about the future of financial services in the EEA? See the recording that will follow soon.
Pictures of the conference
Full agenda of the conference
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