Levels Level 1: Standard legislative procedure At the first level, the EC submits a legislative proposal, based on its right to launch such an initiative. The proposal explains the basic political aspects the EC would like to see regulated, as well as the implementing bodies it would like to involve for level 2. This allows them to comment on the proposal and contribute to vision developed by the EC. The EP can agree to the proposal with or without amending it in the form of textual additions, modifications or deletions and pass it to the CoM.
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Levels Level 1: Standard legislative procedure At the first level, the EC submits a legislative proposal, based on its right to launch such an initiative.
The proposal explains the basic political aspects the EC would like to see regulated, as well as the implementing bodies it would like to involve for level 2. This allows them to comment on the proposal and contribute to vision developed by the EC. The EP can agree to the proposal with or without amending it in the form of textual additions, modifications or deletions and pass it to the CoM. Subsequently, the CoM can accept or reject the proposal as received from the EP.
If the CoM rejects the proposal, the CoM adopts a consensus position which is followed by a second reading and a request to the EP to propose a new position. The EP can approve the consensus position of the CoM, reject it as a whole, or make amendments to it. Approval by the EP constitutes a formal final decision. Concurrently, rejection by the EP brings the legislative procedure to an end. However, in most situations the EP amends the consensus position.
Then the CoM needs to accept the amendments, or reject some or all of them. If the CoM rejects, a conciliation committee is established which conducts a third reading. The proposal by the EC can take the form of a directive or a regulation. A directive requires Member States to achieve a particular result without dictating the means of achieving that result.
Therefore, to be effective a directive needs to be implemented in national legislation. The directive is chosen over a regulation if specific national financial markets require to have legislation tailored to each country individually. A directive can be distinguished from regulations which are self-executing and do not require any implementing measures. There is no question of this intermediate step if the opted form is a regulation.
A regulation comes into force immediately, rendering translation into national legislation unnecessary. The form of a regulation is chosen if the markets concerned are organised internationally to such an extent that a uniform pan-country framework is considered desirable.
Level 2: Technical standards The choice of basic political aspects is made at level 1. Specification of the aspects to be further developed as technical standards is produced at this level.
Development of these standards takes place at level 2. Regulatory standards represent an elaboration of the level 1 text, and ensure harmonisation of the new legislation among the different countries. The purpose of an implementing standard is to define how the legislation is to be implemented, to ensure that all involved parties from the 28 countries ultimately comply uniformly with the regulation and that achieving a level playing field is done as effectively as possible. It is not allowed to develop policy or strategic choices in regulatory and implementing standards.
The technical standards are developed with the support from technical experts. The way in which they are engaged is specific to the type of financial services concerned.
A technical standard is legally binding if the EC confirms this is the case. Level 3: Feasibility of implementing the supervision in practice At level 3, the regulations that are not worked out in the form of technical regulatory or implementing standards are translated by national supervisors into guidelines and recommendations. This ensures uniform and consistent application of the new legislation within a member state. Level 4: Monitoring implementation After a directive or regulation has been implemented, the EC is responsible for monitoring compliance by the various Member States, and for warning about differences in impact between countries.
To this end, the EC gathers information, independently as well as with the help of the ESAs and market parties, on how a regulation has been implemented in the Member States. If it detects major differences between Member States, the EC can opt to introduce amendments to the regulation. In extreme cases, if the EC sees that a Member State has implemented a regulation incompletely or even incorrectly, or has failed to amend national laws that conflict with EU legislation, it can bring a case before the European Court of Justice.
EU legislation: The Lamfalussy Process
The Latham Team Lamfalussy Process The Lamfalussy process was established in to create a faster and more flexible legislation in the financial sector at a European level. It can be described as a fast-track procedure for legislation which is divided into four levels. Level 3: Guidelines and Recommendations by ESMA: ESMA issues guidelines and recommendations to national authorities and market participants to ensure the uniform application of the level 1 and level 2 acts. The Four Levels of the Lamfalussy Process Level 1: Framework Acts Level one comprises the framework acts enacted as directive or regulation by the Parliament and Council under the co-decision procedure. The co-decision procedure Art. Framework acts often contain detailed provisions and extensive annexes and thereby anticipate the delegated and implementing acts on levels 2 and 3 of the Lamfalussy process.
Text Review of the Lamfalussy process With a view to strengthening the Lamfalussy process, the Commission presents practical improvements to encourage deeper cooperation regarding supervision and greater consistency in national implementation and enforcement. In this context, in particular the role and impact of the committees of regulators should be strengthened. It consists of four levels. It starts with the adoption of the framework legislation Level 1 and detailed implementing measures Level 2.