26.3.2010 EN Official Journal of the European Union L 80/10 COMMISSION REGULATION (EU) No 255/2010 of 25 March 2010 laying down common rules on air traffic flow management (Text with EEA relevance) THE EUROPEAN COMMISSION, Having regard to the Treaty on the Functioning of the European Union, Having regard to Regulation (EC) No 551/2004 of the European Parliament and of the Council of 10 March 2004 on the organisation and the use of the airspace in the single European sky (the airspace Regulation) (1) and in particular Article 6(7) thereof, Whereas: (1) The Commission is required to lay down measures regarding air traffic flow management (hereinafter ATFM) with a view to optimising available capacity in the use of airspace and enhancing ATFM processes. (2) The European Organisation for the Safety of Air Navigation (Eurocontrol) has been mandated in accordance with Article 8(1) of Regulation (EC) No 549/2004 of the European Parliament and of the Council of 10 March 2004 laying down the framework for the creation of the single European sky (the framework Regulation) (2) to develop implementing rules for ATFM. This Regulation is based on the resulting mandate report of 7 December 2007. (3) The uniform application of specific rules and procedures within the airspace of the single European sky is critical for the achievement of the optimum use of available air traffic control capacity through the efficient management and operation of the ATFM function. (4) This Regulation should not cover military operations and training as referred to in Article 1(2) of Regulation (EC) No 549/2004. However military aircraft operating as general air traffic should be subject to ATFM measures when operating or intending to operate within airspace or airports to which ATFM measures apply. (5) In accordance with Article 13 of Regulation (EC) No 549/2004, Member States’ essential security or defence policy interests should be safeguarded in the definition and implementation of ATFM measures. (6) A single central unit for ATFM in charge of planning, coordination and execution of ATFM measures has been established by Eurocontrol taking into consideration the recommendations of the International Civil Aviation Organisation (ICAO). Member States should be required to take the necessary measures to ensure that the central unit for ATFM optimises the overall effects of ATFM measures on the European air traffic management network (hereinafter EATMN). (7) ATFM measures should be based on principles laid down by ICAO and all parties in the ATFM system should adhere to rules that ensure that air traffic control capacity is used safely and to the maximum extent possible. (8) ATFM measures should take into account the availability of routes and airspace in particular through the application of the flexible use of airspace by all relevant parties including the airspace management cell laid down by Commission Regulation (EC) No 2150/2005 of 23 December 2005 laying down common rules for the flexible use of airspace (3). (9) In order to optimise available capacity of the EATMN, including airports, procedures aimed at increasing the consistency between airport slots and flight plans should be established. (10) It is appropriate to provide Member States and parties involved in ATFM processes with sufficient time to comply with requirements for air traffic flow management. (11) The measures provided for in this Regulation are in accordance with the opinion of the Single Sky Committee, HAS ADOPTED THIS REGULATION: Article 1 Subject matter and scope 1. This Regulation lays down the requirements for air traffic flow management (hereinafter ATFM) in order to optimise the available capacity of the European air traffic management network (hereinafter EATMN) and enhance ATFM processes. 2. This Regulation shall apply within the airspace referred to in Article 1(3) of Regulation (EC) No 551/2004 to: (a) all flights intended to operate or operating as general air traffic and in accordance with the instrument flight rules (hereinafter IFR) in whole or in part; (b) all phases of flights referred to in point (a) and air traffic management. 3. This Regulation shall apply to the following parties, or agents acting on their behalf, involved in ATFM processes: (a) operators of aircraft, (b) air traffic service (hereinafter ATS) units, including ATS reporting offices and aerodrome control services; (c) aeronautical information services; (d) entities involved in airspace management; (e) airport managing bodies; (f) the central unit for ATFM; (g) local ATFM units; (h) slot coordinators of coordinated airports. Article 2 Definitions For the purposes of this Regulation the definitions provided for in Article 2 of Regulation (EC) No 549/2004 and Article 2 of Council Regulation (EEC) No 95/93 (4) shall apply. The following definitions shall also apply: 1. ‘air traffic flow management (ATFM) measure’ means the actions taken to perform air traffic flow management and capacity management; 2. ‘operator’ means a person, organisation or enterprise engaged in or offering to engage in an aircraft operation; 3. ‘instrument flight rules (IFR)’ means instrument flight rules as defined in Annex 2 of the 1944 Chicago Convention on International Civil Aviation (hereinafter Chicago Convention); 4. ‘air traffic services (ATS) reporting office’ means an ATS unit established for the purpose of receiving reports concerning ATS and flight plans submitted before the first delivery of an air traffic control clearance; 5. ‘local air traffic flow management (ATFM) unit’ means a flow management entity operating on behalf of one or more other flow management entities as the interface between the central unit for ATFM and an ATS unit or a group of such units; 6. ‘critical event’ means an unusual situation or crisis involving a major loss of EATMN capacity, or a major imbalance between EATMN capacity and demand, or a major failure in the information flow in one or several parts of the EATMN; 7. ‘air traffic flow management (ATFM) departure slot’ means a calculated take-off time attributed by the central unit for ATFM with a time tolerance managed by the local ATS unit; 8. ‘route and traffic orientation’ means policies and procedures for the use of routes by aircraft; 9. ‘multiple flight plan’ means more than one flight plan for the same intended flight between two airports; 10. ‘air traffic service (ATS) unit sector configuration’ means the four dimensional description of an ATS unit airspace sector, or group of sectors, which may be operated on a permanent or temporary basis; 11. ‘aerodrome taxi time’ means the pre-determined time value from off-block to take-off, expressed in minutes and valid during normal airport operations; 12. ‘updated flight position’ means aircraft position, updated by surveillance data, flight plan data or position reports; 13. ‘air traffic control clearance’ means the authorisation for an aircraft to proceed under conditions specified by an air traffic control unit; 14. ‘flight plan suspension’ means the process initiated by an entity performing ATFM to ensure that a change is made to the flight plan by the operator before the execution of the flight; 15. ‘air service’ means a flight or a series of flights carrying passengers, cargo or mail for remuneration or hire; 16. ‘operational log’ means a log of the ATFM system, converted into a database to allow quick search of ATFM data. Article 3 Air traffic flow management framework 1. The planning, coordination and execution of the ATFM measures by the parties referred to in Article 1(3) shall comply with the ICAO provisions specified in the Annex. 2. ATFM shall be governed by the following principles: (a) ATFM measures shall: (i) prevent excessive air traffic demand compared with declared air traffic control (ATC) capacity of sectors and airports; (ii) use EATMN capacity to the maximum extent possible in order to optimise the efficiency of the EATMN and minimise adverse effects on operators; (iii) optimise the EATMN capacity made available through the development and application of capacity enhancing measures by ATS units; (iv) support the management of critical events; (b) local ATFM units and the central unit for ATFM shall be considered as part of the ATFM function. 3. The allocation of ATFM departure slots shall give priority to flights according to the order of their planned entry into the location at which the ATFM measure will apply, unless specific circumstances require application of a different priority rule which is formally agreed and is of benefit to the EATMN. The first subparagraph may be applied to flights which are unable to accept the re-routing option to avoid or alleviate congested areas, taking into consideration the location and extent of the congested area. Article 4 General obligations of Member States 1. Member States shall ensure that the ATFM function is available to parties referred to in Article 1(3) on a 24 hour basis. 2. The definition and implementation of ATFM measures shall be compatible with Member States security and defence requirements, in order to ensure efficiency in airspace planning, allocation and use for the benefit of parties referred in Article 1(3). 3. Consistent procedures shall be established for the cooperation between the parties involved in ATFM function, ATS units and entities involved in airspace management, in order to optimise the use of the airspace. 4. A common reference document containing the policies, procedures and description for route and traffic orientation shall be created. Where applicable, publication of route availability in national aeronautical information publications shall be fully consistent with this common reference document. 5. Common procedures for requesting exemption from an ATFM departure slot shall be drawn up in accordance with the ICAO provisions specified in the Annex. Those procedures shall be coordinated with the central unit for ATFM and published in national aeronautical information publications. Article 5 Obligations of Member States concerning the central unit for ATFM Member States shall ensure that the central unit for ATFM: (a) optimises the overall performance effects on the EATMN through planning, coordination and implementation of ATFM measures; (b) consults with operators on the definition of ATFM measures; (c) ensures the effective implementation of ATFM measures, together with local ATFM units; (d) in coordination with local ATFM units identifies alternative routings to avoid or alleviate congested areas, taking into account the overall performance effects on the EATMN; (e) offers a re-routing to those flights that would optimise the effect of point (d); (f) provides information on ATFM in a timely manner to operators and ATS units, including: (i) planned ATFM measures; (ii) impact of ATFM measures on take-off time and flight profile of individual flights; (g) monitors the occurrences of missing flight plans and multiple flight plans that are filed; (h) suspends a flight plan when, considering the time tolerance, the ATFM departure slot cannot be met and a new estimated off-block time is not known; (i) monitors the number of exemptions granted in accordance with Article 4(5). Article 6 General obligations of ATS units 1. When an ATFM measure has to be applied, ATS units shall coordinate through the local ATFM unit with the central unit for ATFM in order to ensure that the choice of measure is made with respect to the optimisation of the overall performance effects on the EATMN. 2. When necessary, ATS reporting offices shall facilitate the exchange of information between pilots or operators and the local or the central unit for ATFM. 3. ATS units shall ensure that ATFM measures applied to airports are coordinated with the airport managing body concerned, in order to ensure efficiency in airport planning and usage for the benefit of parties referred to in Article 1(3). 4. ATS units shall notify to the central unit for ATFM through the local ATFM unit all events that may impact air traffic control capacity or air traffic demand. 5. ATS units shall provide the central unit for ATFM with the following data and subsequent updates, in a timely manner and ensuring its quality: (a) availability of airspace and route structures, (b) ATS unit sector configurations and activations, (c) aerodrome taxi times, (d) air traffic control sector and airport capacities, (e) route availability including availability through application of flexible use of airspace in accordance with Regulation (EC) No 2150/2005, (f) updated flight positions, (g) deviations from flight plans, (h) airspace availability including availability through application of flexible use of airspace in accordance with Regulation (EC) No 2150/2005, (i) actual flight take-off times. The data shall be made available to parties referred to in Article 1(3) and provided free of charge to, and by, the central unit for ATFM. 6. The ATS unit at the departure airport shall ensure that: (a) where a flight is subject to an ATFM departure slot, that slot is included as part of the air traffic control clearance; (b) flights adhere to ATFM departure slots; (c) flights not adhering to their estimated off blocks time, taking into account the established time tolerance, are not given take-off clearance; (d) flights whose flight plan has been rejected or suspended are not given take-off clearance. Article 7 General obligations of operators 1. Each intended flight shall be covered by a single flight plan. The filed flight plan shall correctly reflect the intended flight profile. 2. All relevant ATFM measures and changes thereto shall be incorporated into the planned flight operation and communicated to the pilot. 3. Where departing from an airport not subject to an ATFM departure slot, operators are responsible for adhering to their estimated off blocks time, taking into account a time tolerance as laid down in relevant ICAO provisions specified in the Annex. 4. Where a flight plan has been suspended in accordance with Article 5(h), the operator concerned shall arrange for updating or cancelling the flight plan. Article 8 General obligations of airport managing bodies Airport managing bodies shall notify to the central unit for ATFM, directly or through the local ATFM unit or ATS units or both, all events that may impact air traffic control capacity or air traffic demand. They shall inform the local ATFM unit and ATS units where the notification is done directly. Article 9 Consistency between flight plans and airport slots 1. Member States shall ensure that, where requested by an airport slot coordinator or a managing body of a coordinated airport, the central unit for ATFM or the local ATFM unit shall provide them with the accepted flight plan of a flight operating at that airport, before that flight takes place. The airport slot coordinators or the managing bodies of coordinated airports shall arrange access to the accepted flight plans provided by the central unit for ATFM or the local ATFM unit. 2. Before flight, operators shall provide airports of departure and arrival with the necessary information to enable a correlation to be made between the flight designator contained in the flight plan and that notified for the corresponding airport slot. 3. Any operator, airport managing body and ATS unit shall be entitled to report to the airport slot coordinator on repeated operation of air services at times that are significantly different from the allocated airport slots or with the use of slots in a significantly different way from that indicated at the time of allocation, where this causes prejudice to airport or air traffic operations. 4. Member States shall ensure that the central unit for ATFM reports to the airport slot coordinators on repeated operation of air services at significantly different times from the allocated airport slots or with the use of slots in a significantly different way from that indicated at the time of allocation, where this causes prejudice to ATFM. Article 10 Obligations concerning critical events 1. Member States shall ensure that ATFM procedures for handling critical events are established and published by the central unit for ATFM, in order to minimise disruption to the EATMN. 2. In the preparation for critical events, ATS units and airport managing bodies shall coordinate the relevance and content of the contingency procedures with operators affected by critical events, including any adjustment to priority rules. The contingency procedures shall include: (a) organisational and coordination arrangements, (b) ATFM measures to manage access to affected areas to prevent excessive air traffic demand compared with declared capacity of the whole or part of the airspace or airports concerned, (c) circumstances, conditions and procedures for the application of priority rules for flights, which respect Member States’ essential security or defence policy interests, (d) recovery arrangements. Article 11 Monitoring of compliance to ATFM measures 1. Member States shall ensure that where adherence to ATFM departure slots at an airport of departure is 80 % or less during a year, the ATS unit at that airport shall provide relevant information of non-compliance and the actions taken to ensure adherence to ATFM departure slots. Such actions shall be indicated in a report to be submitted by the Member State concerned to the Commission. 2. The ATS unit at that airport concerned shall provide relevant information on any failure to adhere to flight plan rejections or suspensions at that airport and of the actions taken to ensure adherence. Such actions shall be indicated in a report to be submitted by the Member State concerned to the Commission. 3. Member States shall ensure that: (a) the central unit for ATFM notifies a Member State which grants exemptions in excess of 0,6 % of that Member State’s annual departures; (b) where a Member State has been notified under point (a), it shall produce a report providing details of the exemptions granted to be submitted to the Commission. 4. Member States shall ensure that where a non-compliance to ATFM measures resulting from application of Article 5(g) is identified, the central unit for ATFM shall notify the operator of the non-compliance. 5. Operators shall submit a report to the central unit for ATFM on each non-compliance to ATFM measures providing details of the circumstances that resulted in a missing flight plan or multiple flight plans and the actions taken to correct such non-compliance. 6. Member States shall ensure that the central unit for ATFM produces an annual report providing details of missing flight plans, or multiple flight plans that are filed and that the report is submitted to the Commission. 7. Member States shall conduct an annual review of adherence to ATFM measures to ensure that parties referred to in Article 1(3) improve the level of adherence to those measures. Article 12 Performance assessment 1. When implementing Article 11, Member States shall ensure that the central unit for ATFM produces annual reports indicating the quality of the ATFM that shall include details of: (a) causes of ATFM measures; (b) impact of ATFM measures; (c) adherence to ATFM measures; (d) contributions by parties referred to in Article 1(3) to the optimisation of the overall network effect. 2. Member States shall ensure that an archive of ATFM data listed in Article 6(5), flight plans, operational logs and relevant contextual data is created and maintained by the central unit for ATFM. The data referred to in the first subparagraph shall be retained for 2 years from their submission and made available to the Commission, Member States, ATS units and operators. That data shall be made available to airport coordinators and airport operators to assist their regular assessment of the declared capacity. Article 13 Safety requirements Member States shall ensure that a safety assessment, including hazard identification, risk assessment and mitigation, is conducted, before any significant changes to ATFM systems and procedures are introduced, including an assessment of a safety management process addressing the complete lifecycle of the air traffic management system. Article 14 Additional requirements 1. Member States shall ensure that personnel of the parties referred to in Article 1(3) involved in ATFM activities are: (a) made duly aware of the provisions of this Regulation; (b) adequately trained and competent for their job functions. 2. Member States shall take the necessary measures to ensure that parties referred to in Article 1(3) with responsibilities for ATFM functions: (a) develop and maintain operations manuals containing the necessary instructions and information to enable their operations personnel to apply the provisions of this Regulation; (b) ensure that these manuals are consistent, accessible and kept up-to-date and that their update and distribution are subject to appropriate quality and documentation configuration management; (c) ensure that the working methods and operating procedures comply with this Regulation. Article 15 Penalties Member States shall lay down the rules on penalties applicable to infringements of the provisions of this Regulation and shall take all measures necessary to ensure that they are implemented. The penalties provided for must be effective, proportionate and dissuasive. The Member States shall notify those provisions to the Commission by 26 September 2011 at the latest and shall notify it without delay of any subsequent amendment affecting them. Article 16 Entry into force and application This Regulation shall enter into force on the 20th day following its publication in the Official Journal of the European Union. It shall apply from 26 September 2011. This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels, 25 March 2010. For the Commission The President José Manuel BARROSO (1) OJ L 96, 31.3.2004, p. 20. (2) OJ L 96, 31.3.2004, p. 1. (3) OJ L 342, 24.12.2005, p. 20. (4) OJ L 14, 22.1.1993, p. 1. ANNEX List of the ICAO provisions for the purposes of air traffic flow management 1. Chapter 3 paragraph 3.7.5 (Air Traffic Flow Management) of Annex 11 to the Chicago Convention — Air Traffic Services (13th edition — July 2001, incorporating amendment No 47). 2. Chapter 3 (ATS Capacity and Air Traffic Flow Management) of ICAO Doc 4444, Procedures for Air Navigation Services — Air Traffic Management (PANS-ATM) (15th edition — 2007). 3. Chapter 8.3 (exemptions from ATFM slot allocation) of ICAO Doc 7030, European (EUR) Regional Supplementary Procedures (5th edition 2007). 4. Chapter 8.4 1.c) (Aircraft operator adherence to ATFM measures) of ICAO Doc 7030, European (EUR) Regional Supplementary Procedures (5th edition 2007). 5. Chapter 2 paragraph 2.3.2 (Changes to EOBT) of ICAO Doc 7030, European (EUR) Region Supplementary Procedures (5th edition 2007).

Summary: Air traffic flow management Air traffic flow management SUMMARY OF: Regulation (EU) No 255/2010 - common rules on air traffic flow management WHAT IS THE AIM OF THE REGULATION? It aims to lay down measures regarding air traffic flow management (ATFM) to optimise available capacity in the use of airspace and enhance ATFM processes. The uniform application of specific rules and procedures within the airspace of the single European sky is critical to achieve the optimum use of available air traffic control capacity, through the efficient management and operation of the ATFM function. KEY POINTS The regulation applies: within the airspace of the single European sky as laid out in Regulation (EC) No 551/2004 on air traffic management and affects all flights intended to operate or operating as general air traffic and in accordance with the instrument flight rules*air traffic management; to the following parties involved in ATFM processes aircraft operatorsair traffic service unitsaeronautical information servicesentities involved in airspace managementairport managing bodiescentral unit for ATFMlocal ATFM unitsslot coordinators of coordinated airports*. The planning, coordination and execution of the ATFM measures undertaken by the above list of parties must be in accordance with the provisions laid out by the International Civil Aviation Organisation (ICAO). EU countries must ensure that: the ATFM function is constantly available to the above list of parties involved in the ATFM processes; the definition and implementation of ATFM measures complies with national security and defence requirements of individual EU countries. General obligations of air traffic services (ATS) units ATS units must coordinate - through the local ATFM unit - with the central unit for ATFM when applying an ATFM measure, to ensure that the selected measure will optimise the overall performance of the European Air Traffic Management network (EATMN)*. ATS units must inform the central unit for ATFM of all events that may affect air traffic control capacity or air traffic demand. ATS units must also provide the central unit for ATFM with various information and subsequent updates, including among other things: availability of airspace and route structures;air traffic control sector and airport capacities;route availability;deviations from flight plans;airspace availability. The full list of data must be made available to the above list of parties involved in ATFM processes and provided free of charge to, and by, the central unit for ATFM. General obligations of operators Any relevant ATFM measures and changes to filed flight plans must be included in the planned flight operation and the pilot must be notified. When a flight plan is suspended because the ATFM departure slot cannot be met, the operator concerned must arrange for updating or cancelling the flight plan. Consistency between flight plans and airport slots EU countries must ensure that, on request by an airport slot coordinator or managing body of a coordinated airport, the central unit for ATFM or the local ATFM unit provides them with the agreed flight plan of a flight operating at that airport, before the flight. Critical events EU countries must ensure the creation and publication of ATFM procedures for the management of critical events to minimise disruption to the EATMN. To prepare for critical events, ATS units and airport managing bodies will coordinate the contingency procedures with the operators affected by such events. Monitoring of ATFM compliance EU countries must ensure that airports adhere to ATFM departure slots. Where the adherence is 80% or less during a year, the ATS units at the airport concerned must detail the actions taken to ensure future adherence. The ATS unit at an airport is also responsible for providing the appropriate information on any failure to adhere to flight plan rejections or suspensions at that airport and to detail the actions taken to ensure future compliance. FROM WHEN DOES THE REGULATION APPLY? It has applied since 26 September 2011. BACKGROUND See also: Single European Sky (European Commission). KEY TERMS Instrument flight rules: rules which allow properly equipped aircraft to be flown under instrument meteorological conditions (detailed in ICAO Annex 2: Rules of the Air, Chapter 5: Instrument Flight Rules). Coordinated airport: an airport with a high level of congestion where demand exceeds capacity during the relevant period and where, in order to land or take off, it is necessary for an air carrier to have a slot allocated by a coordinator. European Air Traffic Management network: the collection of systems enabling air navigation services in the EU to be provided, including the interfaces at the EU's external boundaries. MAIN DOCUMENT Commission Regulation (EU) No 255/2010 of 25 March 2010 laying down common rules on air traffic flow management (OJ L 80, 26.3.2010, pp. 10-16) Successive amendments to Regulation (EU) No 255/2010 have been incorporated into the original text. This consolidated version is of documentary value only. RELATED DOCUMENTS Regulation (EC) No 551/2004 of the European Parliament and of the Council of 10 March 2004 on the organisation and use of the airspace in the single European sky (the airspace Regulation) (OJ L 96, 31.3.2004, pp. 20-25) See consolidated version. last update 15.05.2020


15.12.2010 EN Official Journal of the European Union L 331/1 REGULATION (EU) No 1092/2010 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 24 November 2010 on European Union macro-prudential oversight of the financial system and establishing a European Systemic Risk Board THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof, Having regard to the proposal from the European Commission, Having regard to the opinion of the European Central Bank (1), Having regard to the opinion of the European Economic and Social Committee (2), Acting in accordance with the ordinary legislative procedure (3), Whereas: (1) Financial stability is a precondition for the real economy to provide jobs, credit and growth. The financial crisis has revealed important shortcomings in financial supervision, which has failed to anticipate adverse macro-prudential developments and to prevent the accumulation of excessive risks within the financial system. (2) The European Parliament called repeatedly for the reinforcement of a true level playing field for all actors at the level of the Union while pointing out significant failures in the Union’s supervision of ever more integrated financial markets (in its resolutions of 13 April 2000 on the Commission communication on implementing the framework for financial markets: Action Plan (4), of 21 November 2002 on prudential supervision rules in the European Union (5), of 11 July 2007 on financial services policy (2005 to 2010) – White Paper (6), of 23 September 2008 with recommendations to the Commission on hedge funds and private equity (7) and of 9 October 2008 with recommendations to the Commission on Lamfalussy follow-up: future structure of supervision (8), and in its positions of 22 April 2009 on the amended proposal for a directive of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (9) and of 23 April 2009 on the proposal for a regulation of the European Parliament and of the Council on Credit Rating Agencies (10)). (3) In November 2008, the Commission mandated a High-Level Group chaired by Jacques de Larosière to make recommendations on how to strengthen European supervisory arrangements with a view to better protecting the citizen and rebuilding trust in the financial system. (4) In its final report presented on 25 February 2009 (the ‘de Larosière Report’), the High-Level Group recommended, inter alia, the establishment of a Union level body charged with overseeing risk in the financial system as a whole. (5) In its Communication of 4 March 2009 entitled ‘Driving European Recovery’, the Commission welcomed and broadly supported the recommendations of the de Larosière Report. At its meeting of 19 and 20 March 2009, the European Council agreed on the need to improve the regulation and supervision of financial institutions within the Union and to use the de Larosière Report as a basis for action. (6) In its Communication of 27 May 2009 entitled ‘European Financial Supervision’, the Commission suggested a series of reforms to the current arrangements for safeguarding financial stability at the Union level, in particular including the creation of a European Systemic Risk Board (ESRB) responsible for macro-prudential oversight. The Council on 9 June 2009 and the European Council at its meeting of 18 and 19 June 2009 supported the Commission’s suggestions and welcomed its intention to put forward legislative proposals for the new framework to be in place in the course of 2010. In line with the views of the Commission, the Council concluded, inter alia, that the European Central Bank (ECB) ‘should provide analytical, statistical, administrative and logistical support to the ESRB, also drawing on technical advice from national central banks and supervisors’. The support provided by the ECB to the ESRB, as well as the tasks assigned to the ESRB, should be without prejudice to the principle of the independence of the ECB in the performance of its tasks pursuant to the Treaty on the Functioning of the European Union (TFEU). (7) Given the integration of international financial markets and the contagion risk of financial crises, there is a need for a strong commitment on the part of the Union at the global level. The ESRB should draw expertise from a high-level scientific committee and take on all the global responsibilities required in order to ensure that the voice of the Union is heard on issues relating to financial stability, in particular by cooperating closely with the International Monetary Fund (IMF) and the Financial Stability Board (FSB), which are expected to provide early warnings of macro-prudential risks at the global level, and the partners of the Group of Twenty (G-20). (8) The ESRB should contribute, inter alia, towards implementing the recommendations of the IMF, the FSB and the Bank for International Settlements (BIS) to the G-20. (9) The report of the IMF, the BIS and the FSB, of 28 October 2009, presented to the G-20 Finance Ministers and Central Bank Governors, entitled ‘Guidance to Assess the Systemic Importance of Financial Institutions, Markets and Instruments: Initial Considerations’ also states that the assessment of systemic risk is likely to vary depending on the economic environment. It will also be conditioned by the financial infrastructure and crisis management arrangements and the capacity to deal with failures when they occur. Financial institutions may be systemically important for local, national or international financial systems and economies. The key criteria helping to identify the systemic importance of markets and institutions are size (the volume of financial services provided by the individual component of the financial system), substitutability (the extent to which other components of the system can provide the same services in the event of failure) and interconnectedness (linkages with other components of the system). An assessment based on those three criteria should be supplemented by a reference to financial vulnerabilities and the capacity of the institutional framework to deal with financial failures and should consider a wide range of additional factors such as, inter alia, the complexity of specific structures and business models, the degree of financial autonomy, intensity and scope of supervision, transparency of financial arrangements and linkages that may affect the overall risk of institutions. (10) The ESRB’s task should be to monitor and assess systemic risk in normal times for the purpose of mitigating the exposure of the system to the risk of failure of systemic components and enhancing the financial system’s resilience to shocks. In that respect, the ESRB should contribute to ensuring financial stability and mitigating the negative impacts on the internal market and the real economy. In order to accomplish its objectives, the ESRB should analyse all the relevant information. (11) The present arrangements of the Union place too little emphasis on macro-prudential oversight and on inter-linkages between developments in the broader macroeconomic environment and the financial system. Responsibility for macro-prudential analysis remains fragmented, and is conducted by various authorities at different levels with no mechanism to ensure that macro-prudential risks are adequately identified and that warnings and recommendations are issued clearly, followed up and translated into action. A proper functioning of Union and global financial systems and the mitigation of threats thereto require enhanced consistency between macro- and micro-prudential supervision. (12) A newly designed system of macro-prudential oversight requires credible and high-profile leadership. Therefore, given its key role and its international and internal credibility, and in the spirit of the recommendations of the de Larosière Report, the President of the ECB should be the Chair of the ESRB for a first term of 5 years following the entry into force of this Regulation. In addition, the accountability requirements should be increased and the ESRB bodies should be able to draw on a wide range of experience, backgrounds and opinions. (13) The de Larosière Report also states that macro-prudential oversight is not meaningful unless it can somehow impact on supervision at the micro level whilst micro-prudential supervision cannot effectively safeguard financial stability without adequately taking account of macro-level developments. (14) A European System of Financial Supervision (ESFS) should be established, bringing together the actors of financial supervision at national level and at the level of the Union, to act as a network. Pursuant to the principle of sincere cooperation in accordance with Article 4(3) of the Treaty on European Union, the parties to the ESFS should cooperate with trust and full mutual respect, in particular to ensure that appropriate and reliable information flows between them. At the level of the Union, the network should comprise the ESRB and three micro-supervisory authorities: the European Supervisory Authority (European Banking Authority), established by Regulation (EU) No 1093/2010 of the European Parliament and of the Council (11), the European Supervisory Authority (European Insurance and Occupational Pensions Authority), established by Regulation (EU) No 1094/2010 of the European Parliament and of the Council (12), and the European Supervisory Authority (European Securities and Markets Authority), established by Regulation (EU) No 1095/2010 of the European Parliament and of the Council (13) (hereinafter collectively referred to as the ‘ESAs’). (15) The Union needs a specific body responsible for macro-prudential oversight across its financial system, which would identify risks to financial stability and, where necessary, issue risk warnings and recommendations for action to address such risks. Consequently, the ESRB should be established as a new independent body, covering all financial sectors as well as guarantee schemes. The ESRB should be responsible for conducting macro-prudential oversight at the level of the Union and should have no legal personality. (16) The ESRB should comprise a General Board, a Steering Committee, a Secretariat, an Advisory Scientific Committee and an Advisory Technical Committee. The composition of the Advisory Scientific Committee should take into account adequate rules of conflict of interests adopted by the General Board. The establishment of the Advisory Technical Committee should take into account existing structures with a view to avoiding any duplication. (17) The ESRB should issue warnings and, where it deems necessary, recommendations either of a general or a specific nature, which should be addressed in particular to the Union as a whole or to one or more Member States, or to one or more of the ESAs, or to one or more of the national supervisory authorities with a specified timeline for the relevant policy response. (18) The ESRB should elaborate a colour code in order to allow interested parties better to assess the nature of the risk. (19) In order to increase their influence and legitimacy, such warnings and recommendations should also be transmitted, subject to strict rules of confidentiality, to the Council and the Commission and, where addressed to one or more national supervisory authorities, to the ESAs. The deliberations of the Council should be prepared by the Economic and Financial Committee (EFC) in accordance with its role as defined in the TFEU. In order to prepare the Council’s discussions and provide it with timely policy advice, the ESRB should inform the EFC regularly and should send the texts of any warnings and recommendations as soon as they have been adopted. (20) The ESRB should also monitor compliance with its warnings and recommendations, based on reports from addressees, in order to ensure that its warnings and recommendations are effectively followed. Addressees of recommendations should act on them and provide an adequate justification in case of inaction (‘act or explain’ mechanism). If the ESRB considers that the reaction is inadequate, it should inform, subject to strict confidentiality rules, the addressees, the Council and, where appropriate, the European Supervisory Authority concerned. (21) The ESRB should decide, on a case-by-case basis and after having informed the Council sufficiently in advance so that it is able to react, whether a recommendation should be kept confidential or made public, bearing in mind that public disclosure can help to foster compliance with the recommendations in certain circumstances. (22) If the ESRB detects a risk which could seriously jeopardise the orderly functioning and integrity of financial markets or the stability of the whole or part of the Union’s financial system, it should promptly inform the Council of the situation. If the ESRB determines that an emergency situation may arise, it should contact the Council and provide an assessment of the situation. The Council should then assess the need to adopt a decision addressed to the ESAs determining the existence of an emergency situation. During that process, due protection of confidentiality is of the outmost importance. (23) The ESRB should report to the European Parliament and the Council at least annually, and more frequently in the event of widespread financial distress. Where appropriate, the European Parliament and the Council should be able to invite the ESRB to examine specific issues related to financial stability. (24) The ECB and the national central banks should have a leading role in macro-prudential oversight because of their expertise and their existing responsibilities in the area of financial stability. National supervisors should be involved in providing their specific expertise. The participation of micro-prudential supervisors in the work of the ESRB is essential to ensure that the assessment of macro-prudential risk is based on complete and accurate information about developments in the financial system. Accordingly, the chairpersons of the ESAs should be members with voting rights. One representative of the competent national supervisory authorities of each Member State should attend meetings of the General Board, without voting rights. In a spirit of openness, 15 independent persons should provide the ESRB with external expertise through the Advisory Scientific Committee. (25) The participation of a Member of the Commission in the ESRB will help to establish a link with the macroeconomic and financial surveillance of the Union, while the presence of the President of the EFC will reflect the role of Member States’ ministries responsible for finance and the Council in safeguarding financial stability and performing economic and financial oversight. (26) It is essential that the members of the ESRB perform their duties impartially and consider only the financial stability of the Union as a whole. Where consensus cannot be reached, voting on warnings and recommendations within the ESRB should not be weighted and decisions should, as a rule, be taken by simple majority. (27) The interconnectedness of financial institutions and markets implies that the monitoring and assessment of potential systemic risks should be based on a broad set of relevant macroeconomic and micro-financial data and indicators. Those systemic risks include risks of disruption to financial services caused by a significant impairment of all or parts of the Union’s financial system that have the potential to have serious negative consequences for the internal market and the real economy. Any type of financial institution and intermediary, market, infrastructure and instrument has the potential to be systemically significant. The ESRB should therefore have access to all the information necessary to perform its duties while preserving the confidentiality of that information as required. (28) The measures for the collection of information set out in this Regulation are necessary for the performance of the tasks of the ESRB and should be without prejudice to the legal framework of the European Statistical System in the field of statistics. This Regulation should therefore be without prejudice to Regulation (EC) No 223/2009 of the European Parliament and of the Council of 11 March 2009 on European statistics (14) and to Council Regulation (EC) No 2533/98 of 23 November 1998 concerning the collection of statistical information by the European Central Bank (15). (29) Market participants can provide valuable input to the understanding of the evolutions affecting the financial system. Where appropriate, the ESRB should therefore consult private sector stakeholders, including financial sector representatives, consumer associations, user groups in the financial services area established by the Commission or by Union legislation, and give them a fair opportunity to make observations. (30) The establishment of the ESRB should contribute directly to achieving the objectives of the internal market. The Union macro-prudential oversight of the financial system is an integral part of the overall new supervisory arrangements in the Union as the macro-prudential aspect is closely linked to the micro-prudential supervisory tasks attributed to the ESAs. Only with arrangements in place that properly acknowledge the interdependence of micro- and macro-prudential risks can all stakeholders have sufficient confidence to engage in cross-border financial activities. The ESRB should monitor and assess risks to financial stability arising from developments that can impact on a sectoral level or at the level of the financial system as a whole. By addressing such risks, the ESRB should contribute directly to an integrated Union supervisory structure necessary to promote timely and consistent policy responses among the Member States, thus preventing diverging approaches and improving the functioning of the internal market. (31) The Court of Justice in its judgment of 2 May 2006 in Case C-217/04 (United Kingdom of Great Britain and Northern Ireland v. European Parliament and Council of the European Union) held that ‘nothing in the wording of Article 95 EC [now Article 114 TFEU] implies that the addressees of the measures adopted by the Community legislature on the basis of that provision can only be the individual Member States. The legislature may deem it necessary to provide for the establishment of a Community body responsible for contributing to the implementation of a process of harmonisation in situations where, in order to facilitate the uniform implementation and application of acts based on that provision, the adoption of non-binding supporting and framework measures seems appropriate’ (16). The ESRB should contribute to the financial stability necessary for further financial integration in the internal market by monitoring systemic risks and issuing warnings and recommendations where appropriate. Those tasks are closely linked to the objectives of the Union legislation concerning the internal market for financial services. The ESRB should therefore be established on the basis of Article 114 TFEU. (32) As suggested in the de Larosière Report, a step-by-step approach is necessary and the European Parliament and the Council should conduct a full review of the ESFS, the ESRB and the ESAs by 17 December 2013. (33) Since the objective of this Regulation, namely an effective macro-prudential oversight of the Union financial system, cannot be sufficiently achieved by the Member States because of the integration of the Union financial markets, and can therefore be better achieved at the Union level, the Union may adopt measures in accordance with the principle of subsidiarity, as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary to achieve that objective, HAVE ADOPTED THIS REGULATION: CHAPTER I GENERAL PROVISIONS Article 1 Establishment 1. A European Systemic Risk Board (ESRB) is established. It shall have its seat in Frankfurt am Main. 2. The ESRB shall be part of the European System of Financial Supervision (ESFS), the purpose of which is to ensure the supervision of the Union’s financial system. 3. The ESFS shall comprise: (a) the ESRB; (b) the European Supervisory Authority (European Banking Authority) established by Regulation (EU) No 1093/2010; (c) the European Supervisory Authority (European Insurance and Occupational Pensions Authority) established by Regulation (EU) No 1094/2010; (d) the European Supervisory Authority (European Securities and Markets Authority) established by Regulation (EU) No 1095/2010; (e) the Joint Committee of the European Supervisory Authorities (Joint Committee) provided for by Article 54 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010; (f) the competent or supervisory authorities in the Member States as specified in the Union acts referred to in Article 1(2) of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010. 4. Pursuant to the principle of sincere cooperation in accordance with Article 4(3) of the Treaty on European Union, the parties to the ESFS shall cooperate with trust and full mutual respect, in particular to ensure that appropriate and reliable information flows between them. Article 2 Definitions For the purpose of this Regulation, the following definitions shall apply: (a) ‘financial institution’ means any undertaking that falls within the scope of the legislation referred to in Article 1(2) of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010, as well as any other undertaking or entity in the Union whose main business is of a similar nature; (b) ‘financial system’ means all financial institutions, markets, products and market infrastructures; (c) ‘systemic risk’ means a risk of disruption in the financial system with the potential to have serious negative consequences for the internal market and the real economy. All types of financial intermediaries, markets and infrastructure may be potentially systemically important to some degree. Article 3 Mission, objectives and tasks 1. The ESRB shall be responsible for the macro-prudential oversight of the financial system within the Union in order to contribute to the prevention or mitigation of systemic risks to financial stability in the Union that arise from developments within the financial system and taking into account macroeconomic developments, so as to avoid periods of widespread financial distress. It shall contribute to the smooth functioning of the internal market and thereby ensure a sustainable contribution of the financial sector to economic growth. 2. For the purposes of paragraph 1, the ESRB shall carry out the following tasks: (a) determining and/or collecting and analysing all the relevant and necessary information, for the purposes of achieving the objectives described in paragraph 1; (b) identifying and prioritising systemic risks; (c) issuing warnings where such systemic risks are deemed to be significant and, where appropriate, making those warnings public; (d) issuing recommendations for remedial action in response to the risks identified and, where appropriate, making those recommendations public; (e) when the ESRB determines that an emergency situation may arise pursuant to Article 18 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010 issuing a confidential warning addressed to the Council and providing the Council with an assessment of the situation, in order to enable the Council to assess the need to adopt a decision addressed to the ESAs determining the existence of an emergency situation; (f) monitoring the follow-up to warnings and recommendations; (g) cooperating closely with all the other parties to the ESFS; where appropriate, providing the ESAs with the information on systemic risks required for the performance of their tasks; and, in particular, in collaboration with the ESAs, developing a common set of quantitative and qualitative indicators (risk dashboard) to identify and measure systemic risk; (h) participating, where appropriate, in the Joint Committee; (i) coordinating its actions with those of international financial organisations, particularly the IMF and the FSB as well as the relevant bodies in third countries on matters related to macro-prudential oversight; (j) carrying out other related tasks as specified in Union legislation. CHAPTER II ORGANISATION Article 4 Structure 1. The ESRB shall have a General Board, a Steering Committee, a Secretariat, an Advisory Scientific Committee and an Advisory Technical Committee. 2. The General Board shall take the decisions necessary to ensure the performance of the tasks entrusted to the ESRB, pursuant to Article 3(2). 3. The Steering Committee shall assist in the decision-making process of the ESRB by preparing the meetings of the General Board, reviewing the documents to be discussed and monitoring the progress of the ESRB’s ongoing work. 4. The Secretariat shall be responsible for the day-to-day business of the ESRB. It shall provide high-quality analytical, statistical, administrative and logistical support to the ESRB under the direction of the Chair and the Steering Committee in accordance with Council Regulation (EU) No 1096/2010 (17). It shall also draw on technical advice from the ESAs, national central banks and national supervisors. 5. The Advisory Scientific Committee and the Advisory Technical Committee referred to in Articles 12 and 13 shall provide advice and assistance on issues relevant to the work of the ESRB. Article 5 Chair and Vice-Chairs of the ESRB 1. The ESRB shall be chaired by the President of the ECB for a term of 5 years following the entry into force of this Regulation. For the subsequent terms, the Chair of the ESRB shall be designated in accordance with the modalities determined on the basis of the review provided for in Article 20. 2. The first Vice-Chair shall be elected by and from the members of the General Council of the ECB for a term of 5 years, with regard to the need for a balanced representation of Member States overall and between those whose currency is the euro and those whose currency is not the euro. The first Vice-Chair may be re-elected once. 3. The second Vice-Chair shall be the Chair of the Joint Committee as appointed pursuant to Article 55(3) of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010. 4. The Chair and the Vice-Chairs shall present to the European Parliament, during a public hearing, how they intend to discharge their duties under this Regulation. 5. The Chair shall preside at the meetings of the General Board and the Steering Committee. 6. The Vice-Chairs, in order of precedence, shall preside at the General Board and/or the Steering Committee when the Chair is unable to participate in a meeting. 7. If the term of office of a member of the General Council of the ECB elected as first Vice-Chair ends before the completion of the five-year term or if for any reason the first Vice-Chair is unable to discharge his duties, a new first Vice-Chair shall be elected in accordance with paragraph 2. 8. The Chair shall represent the ESRB externally. Article 6 General Board 1. Members of the General Board with voting rights shall comprise: (a) the President and the Vice-President of the ECB; (b) the Governors of the national central banks; (c) a Member of the Commission; (d) the Chairperson of the European Supervisory Authority (European Banking Authority); (e) the Chairperson of the European Supervisory Authority (European Insurance and Occupational Pensions Authority); (f) the Chairperson of the European Supervisory Authority (European Securities and Markets Authority); (g) the Chair and the two Vice-Chairs of the Advisory Scientific Committee; (h) the Chair of the Advisory Technical Committee. 2. Members of the General Board without voting rights shall comprise: (a) one high-level representative per Member State of the competent national supervisory authorities, in accordance with paragraph 3; (b) the President of the Economic and Financial Committee (EFC). 3. With regard to the representation of the national supervisory authorities under paragraph 2(a), the respective high-level representatives shall rotate depending on the item discussed, unless the national supervisory authorities of a particular Member State have agreed on a common representative. 4. The General Board shall establish rules of procedure for the ESRB. Article 7 Impartiality 1. When participating in the activities of the General Board and of the Steering Committee or when conducting any other activity relating to the ESRB, the members of the ESRB shall perform their duties impartially and solely in the interest of the Union as a whole. They shall not seek nor take instructions from the Member States, the Union institutions or any other public or private body. 2. No member of the General Board (whether voting or non-voting) shall have a function in the financial industry. 3. Neither the Member States, the Union institutions nor any other public or private body shall seek to influence the members of the ESRB in the performance of the tasks set out in Article 3(2). Article 8 Professional secrecy 1. Members of the General Board and any other persons who work or who have worked for or in connection with the ESRB (including the relevant staff of central banks, the Advisory Scientific Committee, the Advisory Technical Committee, the ESAs and the Member States’ competent national supervisory authorities) shall not disclose information that is subject to professional secrecy, even after their duties have ceased. 2. Information received by members of the ESRB shall be used only in the course of their duties and in performing the tasks set out in Article 3(2). 3. Without prejudice to Article 16 and the application of criminal law, no confidential information received by the persons referred to in paragraph 1 whilst performing their duties shall be divulged to any person or authority whatsoever, except in summary or aggregate form, such that individual financial institutions cannot be identified. 4. The ESRB shall, together with the ESAs, agree on and establish specific confidentiality procedures in order to safeguard information regarding individual financial institutions and information from which individual financial institutions can be identified. Article 9 Meetings of the General Board 1. Ordinary plenary meetings of the General Board shall be convened by the Chair of the ESRB and shall take place at least four times a year. Extraordinary meetings may be convened at the initiative of the Chair of the ESRB or at the request of at least one third of the members of the General Board with voting rights. 2. Each member shall be present in person at the meetings of the General Board and shall not be represented. 3. By way of derogation from paragraph 2, a member who is prevented from attending the meetings for a period of at least 3 months may appoint an alternate. That member may also be replaced by a person who has been formally appointed under the rules governing the institution concerned for the substitution of representatives on a temporary basis. 4. Where appropriate, high-level representatives from international financial organisations carrying out activities directly related to the tasks of the ESRB set out in Article 3(2) may be invited to attend the meetings of the General Board. 5. Participation in the work of the ESRB may be open to high-level representatives of the relevant authorities from third countries, in particular from EEA countries, strictly limited to issues of particular relevance to those countries. Arrangements may be made by the ESRB specifying, in particular, the nature, scope and procedural aspects of the involvement of those third countries in the work of the ESRB. Such arrangements may provide for representation, on an ad-hoc basis, as an observer, on the General Board and should concern only items of relevance to those countries, excluding any case where the situation of individual financial institutions or Member States may be discussed. 6. The proceedings of the meetings shall be confidential. Article 10 Voting modalities of the General Board 1. Each member of the General Board with a voting right shall have one vote. 2. Without prejudice to the voting procedures set out in Article 18(1), the General Board shall act by a simple majority of members present with voting rights. In the event of a tie, the Chair of the ESRB shall have the casting vote. 3. By derogation from paragraph 2, a majority of two-thirds of the votes cast shall be required to adopt a recommendation or to make a warning or recommendation public. 4. A quorum of two-thirds of the members with voting rights shall be required for any vote to be taken by the General Board. If the quorum is not met, the Chair of the ESRB may convene an extraordinary meeting at which decisions may be taken with a quorum of one-third. The rules of procedure referred to in Article 6(4) shall provide for adequate notice for convening an extraordinary meeting. Article 11 Steering Committee 1. The Steering Committee shall be composed of: (a) the Chair and first Vice-Chair of the ESRB; (b) the Vice-President of the ECB; (c) four other members of the General Board who are also members of the General Council of the ECB, with regard to the need for a balanced representation of Member States overall and between those whose currency is the euro and those whose currency is not the euro. They shall be elected by and from among the members of the General Board who are also members of the General Council of the ECB, for a period of 3 years; (d) a Member of the Commission; (e) the Chairperson of the European Supervisory Authority (European Banking Authority); (f) the Chairperson of the European Supervisory Authority (European Insurance and Occupational Pensions Authority); (g) the Chairperson of the European Supervisory Authority (European Securities and Markets Authority); (h) the President of the EFC; (i) the Chair of the Advisory Scientific Committee; and (j) the Chair of the Advisory Technical Committee. Any vacancy for an elected member of the Steering Committee shall be filled by the election of a new member by the General Board. 2. Meetings of the Steering Committee shall be convened by the Chair of the ESRB at least quarterly, before each meeting of the General Board. The Chair of the ESRB may also convene ad-hoc meetings. Article 12 Advisory Scientific Committee 1. The Advisory Scientific Committee shall be composed of the Chair of the Advisory Technical Committee and 15 experts representing a wide range of skills and experiences proposed by the Steering Committee and approved by the General Board for a four-year, renewable mandate. The nominees shall not be members of the ESAs and shall be chosen on the basis of their general competence and their diverse experience in academic fields or other sectors, in particular in small and medium-sized enterprises or trade-unions, or as providers or consumers of financial services. 2. The Chair and the two Vice-Chairs of the Advisory Scientific Committee shall be appointed by the General Board following a proposal from the Chair of the ESRB and they shall each have a high level of relevant expertise and knowledge, for example by virtue of their academic background in the sectors of banking, securities markets, or insurance and occupational pensions. The chairmanship of the Advisory Scientific Committee should rotate between those three persons. 3. The Advisory Scientific Committee shall provide advice and assistance to the ESRB in accordance with Article 4(5), at the request of the Chair of the ESRB. 4. The ESRB Secretariat shall support the work of the Advisory Scientific Committee and the head of the Secretariat shall participate in its meetings. 5. Where appropriate, the Advisory Scientific Committee shall organise consultations at an early stage with stakeholders such as market participants, consumer bodies and academic experts, in an open and transparent manner, while taking into account the requirement of confidentiality. 6. The Advisory Scientific Committee shall be provided with all necessary means in order to successfully complete its tasks. Article 13 Advisory Technical Committee 1. The Advisory Technical Committee shall be composed of: (a) a representative of each national central bank and a representative of the ECB; (b) one representative per Member State of the competent national supervisory authorities, in accordance with the second subparagraph; (c) a representative of the European Supervisory Authority (European Banking Authority); (d) a representative of the European Supervisory Authority (European Insurance and Occupational Pensions Authority); (e) a representative of the European Supervisory Authority (European Securities and Markets Authority); (f) two representatives of the Commission; (g) a representative of the EFC; and (h) a representative of the Advisory Scientific Committee. The supervisory authorities of each Member State shall choose one representative in the Advisory Technical Committee. With regard to the representation of national supervisory authorities under point (b) of the first subparagraph, the respective representatives shall rotate depending on the item discussed, unless the national supervisory authorities of a particular Member State have agreed on a common representative. 2. The Chair of the Advisory Technical Committee shall be appointed by the General Board following a proposal from the Chair of the ESRB. 3. The Advisory Technical Committee shall provide advice and assistance to the ESRB in accordance with Article 4(5) at the request of the Chair of the ESRB. 4. The ESRB Secretariat shall support the work of the Advisory Technical Committee and the head of the Secretariat shall participate in its meetings. 5. The Advisory Technical Committee shall be provided with all necessary means in order to successfully complete its tasks. Article 14 Other sources of advice In performing the tasks set out in Article 3(2), the ESRB shall, where appropriate, seek the views of relevant private sector stakeholders. CHAPTER III TASKS Article 15 Collection and exchange of information 1. The ESRB shall provide the ESAs with the information on risks necessary for the achievement of their tasks. 2. The ESAs, the European System of Central Banks (ESCB), the Commission, the national supervisory authorities and national statistics authorities shall cooperate closely with the ESRB and shall provide it with all the information necessary for the fulfilment of its tasks in accordance with Union legislation. 3. Subject to Article 36(2) of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010, the ESRB may request information from the ESAs, as a rule in summary or aggregate form such that individual financial institutions cannot be identified. 4. Before requesting information in accordance with this Article, the ESRB shall first take account of the existing statistics produced, disseminated and developed by the European Statistical System and the ESCB. 5. If the requested information is not available or is not made available in a timely manner, the ESRB may request the information from the ESCB, the national supervisory authorities or the national statistics authorities. If the information remains unavailable, the ESRB may request it from the Member State concerned, without prejudice to the prerogatives conferred, respectively, on the Council, the Commission (Eurostat), the ECB, the Eurosystem and the ESCB in the field of statistics and data collection. 6. If the ESRB requests information that is not in summary or aggregate form, the reasoned request shall explain why data on the respective individual financial institution is deemed to be systemically relevant, and necessary, considering the prevailing market situation. 7. Before each request for information which is not in summary or aggregate form, the ESRB shall duly consult the relevant European Supervisory Authority in order to ensure that the request is justified and proportionate. If the relevant European Supervisory Authority does not consider the request to be justified and proportionate, it shall, without delay, send the request back to the ESRB and ask for additional justification. After the ESRB has provided the relevant European Supervisory Authority with such additional justification, the requested information shall be transmitted to the ESRB by the addressees of the request, provided that they have legal access to the relevant information. Article 16 Warnings and recommendations 1. When significant risks to the achievement of the objective in Article 3(1) are identified, the ESRB shall provide warnings and, where appropriate, issue recommendations for remedial action, including, where appropriate, for legislative initiatives. 2. Warnings or recommendations issued by the ESRB in accordance with Article 3(2)(c) and (d) may be of either a general or a specific nature and shall be addressed in particular to the Union as a whole or to one or more Member States, or to one or more of the ESAs, or to one or more of the national supervisory authorities. If a warning or a recommendation is addressed to one or more of the national supervisory authorities, the Member State(s) concerned shall also be informed thereof. Recommendations shall include a specified timeline for the policy response. Recommendations may also be addressed to the Commission in respect of the relevant Union legislation. 3. At the same time as they are transmitted to the addressees in accordance with paragraph 2, the warnings or recommendations shall be transmitted, in accordance with strict rules of confidentiality, to the Council and the Commission and, where addressed to one or more national supervisory authorities, to the ESAs. 4. In order to enhance the awareness of risks in the economy of the Union and to prioritise such risks, the ESRB, in close cooperation with the other parties to the ESFS, shall elaborate a colour-coded system corresponding to situations of different risk levels. Once the criteria for such classification have been elaborated, the ESRB’s warnings and recommendations shall indicate, on a case-by-case basis, and where appropriate, to which category the risk belongs. Article 17 Follow-up of the ESRB recommendations 1. If a recommendation referred to in Article 3(2)(d) is addressed to the Commission, to one or more Member States, to one or more ESAs, or to one or more national supervisory authorities, the addressees shall communicate to the ESRB and to the Council the actions undertaken in response to the recommendation and shall provide adequate justification for any inaction. Where relevant, the ESRB shall, subject to strict rules of confidentiality, inform the ESAs without delay of the answers received. 2. If the ESRB decides that its recommendation has not been followed or that the addressees have failed to provide adequate justification for their inaction, it shall, subject to strict rules of confidentiality, inform the addressees, the Council and, where relevant, the European Supervisory Authority concerned. 3. If the ESRB has made a decision under paragraph 2 on a recommendation that has been made public following the procedure set out in Article 18(1), the European Parliament may invite the Chair of the ESRB to present that decision and the addressees may request to participate in an exchange of views. Article 18 Public warnings and recommendations 1. The General Board shall decide on a case-by-case basis, after having informed the Council sufficiently in advance so that it is able to react, whether a warning or a recommendation should be made public. Notwithstanding Article 10(3), a quorum of two-thirds shall always apply to decisions taken by the General Board under this paragraph. 2. If the General Board decides to make a warning or recommendation public, it shall inform the addressees in advance. 3. The addressees of warnings and recommendations made public by the ESRB shall also be provided with the right of making public their views and reasoning in response thereto. 4. Where the General Board decides not to make a warning or a recommendation public, the addressees and, where appropriate, the Council and the ESAs shall take all the measures necessary for the protection of their confidential nature. CHAPTER IV FINAL PROVISIONS Article 19 Accountability and reporting obligations 1. At least annually and more frequently in the event of widespread financial distress, the Chair of the ESRB shall be invited to an annual hearing in the European Parliament, marking the publication of the ESRB’s annual report to the European Parliament and the Council. That hearing shall be conducted separately from the monetary dialogue between the European Parliament and the President of the ECB. 2. The annual report referred to in paragraph 1 shall contain the information that the General Board decides to make public in accordance with Article 18. The annual report shall be made available to the public. 3. The ESRB shall also examine specific issues at the invitation of the European Parliament, the Council or the Commission. 4. The European Parliament may request the Chair of the ESRB to attend a hearing of the competent Committees of the European Parliament. 5. The Chair of the ESRB shall hold confidential oral discussions at least twice a year and more often if deemed appropriate, behind closed doors with the Chair and Vice-Chairs of the Economic and Monetary Affairs Committee of the European Parliament on the ongoing activity of the ESRB. An agreement shall be concluded between the European Parliament and the ESRB on the detailed modalities of organising those meetings, with a view to ensuring full confidentiality in accordance with Article 8. The ESRB shall provide a copy of that agreement to the Council. Article 20 Review By 17 December 2013, the European Parliament and the Council shall examine this Regulation on the basis of a report from the Commission and, after having received an opinion from the ECB and the ESAs, shall determine whether the mission and organisation of the ESRB need to be reviewed. They shall, in particular, review the modalities for the designation or election of the Chair of the ESRB. Article 21 Entry into force This Regulation shall enter into force on the day following its publication in the Official Journal of the European Union. This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Strasbourg, 24 November 2010. For the European Parliament The President J. BUZEK For the Council The President O. CHASTEL (1) OJ C 270, 11.11.2009, p. 1. (2) Opinion of 22 January 2010 (not yet published in the Official Journal). (3) Position of the European Parliament of 22 September 2010 (not yet published in the Official Journal) and decision of the Council of 17 November 2010. (4) OJ C 40, 7.2.2001, p. 453. (5) OJ C 25 E, 29.1.2004, p. 394. (6) OJ C 175 E, 10.7.2008, p. 392. (7) OJ C 8 E, 14.1.2010, p. 26. (8) OJ C 9 E, 15.1.2010, p. 48. (9) OJ C 184 E, 8.7.2010, p. 214. (10) OJ C 184 E, 8.7.2010, p. 292. (11) See page 12 of this Official Journal. (12) See page 48 of this Official Journal. (13) See page 84 of this Official Journal. (14) OJ L 87, 31.3.2009, p. 164. (15) OJ L 318, 27.11.1998, p. 8. (16) European Court Reports 2006 Page I-03771, para 44. (17) See page 162 of this Official Journal.

Summary: European Systemic Risk Board European Systemic Risk Board SUMMARY OF: Regulation (EU) No 1092/2010 on macro-prudential oversight of the financial system and the establishment of a European Systemic Risk Board WHAT IS THE AIM OF THE REGULATION? In the aftermath of the 2008 global financial crisis, the European Union introduced legislation on macro-prudential oversight of the financial system and establishing the European Systemic Risk Board (ESRB). The ESRB is responsible for the macro-prudential oversight of the EU’s financial system and contributes to the prevention or mitigation of systemic risks in the EU as a whole or parts thereof. It identifies and discusses financial stability risks regardless of their origin. It establishes the European Systemic Risk Board (ESRB) as part of the new European System of Financial Supervision (ESFS), which also includes: the European Banking Authority; the European Insurance and Occupational Pensions Authority; the European Securities and Markets Authority; the Joint Committee of European Supervisory Authorities; the supervisory authorities in the EU countries. The new supervisory architecture also includes a regulation that gives the European Central Bank (ECB) certain specific tasks to support the ESRB. KEY POINTS Mandate, objectives and tasks The ESRB is based in Frankfurt am Main (Germany). It is responsible for monitoring and analysing risk in the financial system as a whole (also known as macro-prudential oversight). To achieve this, the ESRB in particular: identifies systemic risks and classifies them according to their priority; issues warnings where systemic risks are deemed to be significant and makes them public if necessary; recommends remedial action in response to risks identified; can transmit a confidential warning and assessment to the Council when it considers that an emergency situation is likely to occur; monitors the measures taken in response to warnings and recommendations; coordinates with international financial organisations like the International Monetary Fund and the Financial Stability Board (FSB). Organisation The ESRB has the following structure: a General Board that ensures the performance of tasks by taking the necessary decisions; a Steering Committee which assists in the decision-making process; a Secretariat responsible for day-to-day business and providing support; an Advisory Scientific Committee and an Advisory Technical Committee to provide advice and assistance. The ESRB has a chair who represents the ESRB externally and two vice-chairs. The ECB provides analytical, statistical, logistical and administrative support to the ESRB by running the ESRB’s Secretariat. Warnings and recommendations In the event of significant systemic risks to its objective, the ESRB provides warnings and, where appropriate, issues recommendations for remedial action, including legislative initiatives. These warnings or recommendations are addressed in particular to: the EU as a whole; 1 or more EU countries; ECB for the banking macro-prudential supervision tasks conferred to it; 1 or more European supervisory authorities (ESAs); 1 or more national supervisory authorities; 1 or more national authorities designated for the application of measures aimed at addressing systemic or macro-prudential risk; the European Commission in respect of relevant EU legislation; resolution authorities designated by EU countries; or the Single Resolution Board. ESRB recommendations Addressees of recommendations must comply or provide an explanation for any inaction. If the ESRB decides that its recommendation has not been followed or that addressees have not provided adequate justification for their inaction, it confidentially informs the addressees, the European Parliament, the Council and the relevant ESAs. The further evolution of the European surveillance system As the financial crisis evolved and following the worsening sovereign debt crisis in the euro area in 2010-2011, the further integration of the euro area banking systems became necessary. This is why, based on the Commission’s roadmap for setting up a banking union, the European institutions created the following. A Single Supervisory Mechanism (SSM), placing the ECB as the central supervisor for euro area banks (around 6,000 banks). Non-euro area countries may also decide to join. A Single Resolution Mechanism (SRM), the objective of which is to ensure the orderly resolution of failing banks covered by the SSM without using taxpayers’ money. FROM WHEN DOES THE REGULATION APPLY? It has applied since 16 December 2010. BACKGROUND For more information, see: Banking and finance (European Commission) Financial supervision (European Commission) Establishment of the ESRB (European Systemic Risk Board). MAIN DOCUMENT Regulation (EU) No 1092/2010 of the European Parliament and of the Council of 24 November 2010 on European Union macro-prudential oversight of the financial system and establishing a European Systemic Risk Board (OJ L 331, 15.12.2010, pp. 1-11) Successive amendments to Regulation (EU) No 1092/2010 have been incorporated in the original text. This consolidated version is of documentary value only. RELATED DOCUMENTS Council Regulation (EU) No 1096/2010 of 17 November 2010 conferring specific tasks upon the European Central Bank concerning the functioning of the European Systemic Risk Board (OJ L 331, 15.12.2010, pp. 162-164) last update 10.07.2020


28.7.2010 EN Official Journal of the European Union L 196/24 COUNCIL DECISION of 13 July 2010 in accordance with Article 140(2) of the Treaty on the adoption by Estonia of the euro on 1 January 2011 (2010/416/EU) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union (Treaty), and in particular Article 140(2) thereof, Having regard to the proposal from the European Commission, Having regard to the report from the European Commission, Having regard to the report from the European Central Bank, Having regard to the opinion of the European Parliament, Having regard to the discussion of the European Council, Having regard to the recommendation of the members of the Council representing Member States whose currency is the euro, Whereas: (1) The third stage of economic and monetary union (EMU) started on 1 January 1999. By Decision 98/317/EC (1) the Council, meeting in Brussels on 3 May 1998 in the composition of Heads of State or Government, decided that Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland fulfilled the necessary conditions for adopting the single currency on 1 January 1999. (2) By Decision 2000/427/EC (2) the Council decided that Greece fulfilled the necessary conditions for adopting the single currency on 1 January 2001. By Decision 2006/495/EC (3) the Council decided that Slovenia fulfilled the necessary conditions for adopting the single currency on 1 January 2007. By Decisions 2007/503/EC (4) and 2007/504/EC (5) Council decided that Cyprus and Malta respectively fulfilled the necessary conditions for adopting the single currency on 1 January 2008. By Decision 2008/608/EC (6) the Council decided that Slovakia fulfilled the necessary conditions for adopting the single currency on 1 January 2009. (3) In accordance with paragraph 1 of the Protocol on certain provisions relating to the United Kingdom of Great Britain and Northern Ireland annexed to the Treaty establishing the European Community, the United Kingdom notified the Council that it did not intend to move to the third stage of EMU on 1 January 1999. This notification has not been changed since then. In accordance with paragraph 1 of the Protocol on certain provisions relating to Denmark annexed to the Treaty establishing the European Community and the Decision taken by the Heads of State or Government in Edinburgh in December 1992, Denmark notified the Council that it will not participate in the third stage of EMU. Denmark has not requested that the procedure referred to in Article 140(2) of the Treaty be initiated. (4) By virtue of Decision 98/317/EC Sweden has a derogation as defined in Article 139(1) of the Treaty. In accordance with Article 4 of the 2003 Act of Accession, the Czech Republic, Estonia, Latvia, Lithuania, Hungary and Poland have a derogation as defined in Article 139(1) of the Treaty. In accordance with Article 5 of the 2005 Act of Accession, Bulgaria and Romania have a derogation as defined in Article 139(1) of the Treaty. (5) The European Central Bank (ECB) was established on 1 July 1998. The European Monetary System has been replaced by an exchange rate mechanism, the setting-up of which was agreed by a resolution of the European Council on the establishment of an exchange-rate mechanism in the third stage of economic and monetary union of 16 June 1997 (7). The procedures for an exchange-rate mechanism in stage three of economic and monetary union (ERM II) were laid down in the Agreement of 16 March 2006 between the European Central Bank and the national central banks of the Member States outside the euro area laying down the operating procedures for an exchange rate mechanism in stage three of economic and monetary union (8). (6) Article 140(2) of the Treaty lays down the procedures for abrogation of the derogation of the Member States concerned. At least once every two years, or at the request of a Member State with a derogation, the Commission and the ECB shall report to the Council in accordance with the procedure laid down in Article 140(1) of the Treaty. The latest Commission and ECB regular Convergence Reports were adopted in May 2010. (7) National legislation in the Member States including the statutes of national central banks is to be adapted as necessary with a view to ensuring compatibility with Articles 130 and 131 of the Treaty and the Statute of the European System of Central Banks and of the European Central Bank (Statute of the ESCB and of the ECB). The reports of the Commission and the ECB provide a detailed assessment of the compatibility of the legislation of Estonia with Articles 130 and 131 of the Treaty and the Statute of the ESCB and of the ECB. (8) In accordance with Article 1 of Protocol No 13 on the convergence criteria (the Protocol) the criterion on price stability referred to in the first indent of Article 140(1) of the Treaty means that a Member State has a price performance that is sustainable and an average rate of inflation, observed over a period of one year before the examination, that does not exceed by more than one and a half percentage points that of, at most, the three best performing Member States in terms of price stability. For the purpose of the criterion on price stability, inflation is measured by the harmonised indices of consumer prices (HICPs) defined in Council Regulation (EC) No 2494/95 of 23 October 1995 concerning harmonised indices of consumer prices (9). In order to assess the price stability criterion a Member State’s inflation has been measured by the percentage change in the arithmetic average of 12 monthly indices relative to the arithmetic average of 12 monthly indices of the previous period. A reference value calculated as the simple arithmetic average of the inflation rates of the three best-performing Member States in terms of price stability plus 1,5 percentage points was considered in the reports of the Commission and the ECB. In the one-year period ending in March 2010, the inflation reference value was calculated to be 1 percent, with Portugal, Estonia and Belgium as the three best-performing Member States in terms of price stability, with inflation rates of, respectively – 0,8 percent, – 0,7 percent and – 0,1 percent. In the current economic circumstances characterised by a large common adverse shock, where a significant number of countries face episodes of negative inflation rates, it seems warranted to exclude from the best performers those countries whose average inflation rate is distant from the euro area average inflation (0,3 % in March 2010) by a wide margin — in line with the precedent of the 2004 Convergence Report —, as these outliers cannot reasonably be judged as being best performers in terms of price stability and including them would severely affect the reference value and thus the fairness of the criterion. In March 2010, this leads to the exclusion of Ireland, the only country whose 12-month average inflation rate (at – 2,3 % in March 2010) deviated by a wide margin from that of the euro area and other Member States, mainly reflecting the severe economic downturn. (9) In accordance with Article 2 of the Protocol the criterion on the government budgetary position referred to in the second indent of Article 140(1) of the Treaty means that at the time of the examination the Member State is not the subject of a Council Decision under Article 126(6) of the Treaty that an excessive deficit exists. (10) In accordance with Article 3 of the Protocol, the criterion on participation in the exchange-rate mechanism of the European Monetary System referred to in the third indent of Article 140(1) of the Treaty means that a Member State has respected the normal fluctuation margins provided for by the exchange-rate mechanism of the European Monetary System without severe tensions for at least the last two years before the examination. In particular, the Member State must not have devalued its currency’s bilateral central rate against the euro on its own initiative for the same period. Since 1 January 1999 the ERM II provides the framework for assessing the fulfilment of the exchange rate criterion. In assessing the fulfilment of this criterion in their reports, the Commission and the ECB have examined the two-year period ending on 23 April 2010. (11) In accordance with Article 4 of the Protocol, the criterion on the convergence of interest rates referred to in the fourth indent of Article 140(1) of the Treaty means that, observed over a period of one year before the examination, a Member State has had an average nominal long-term interest rate that does not exceed by more than two percentage points that of, at most, the three best performing Member States in terms of price stability. For the purpose of the criteria on the convergence of interest rates, comparable interest rates on 10-year benchmark government bonds were used. Estonia, which was one of the best performing Member States in terms of price stability in March 2010, does not have a harmonised benchmark long-term government bond or a comparable security that could be used for the calculation of the reference value. Therefore, in line with the wording of the Protocol (referring to ‘at most the three best performing Member States’), in order to assess the fulfilment of the interest-rate criterion a reference value calculated as the simple arithmetic average of the nominal long-term interest rates of the two other best performing Member States in terms of price stability plus two percentage points was considered in the reports of the Commission and the ECB. On this basis, the reference value in the one year period ending in March 2010 was 6,0 percent, the average of interest rate in Portugal (4,2 %) and Belgium (3,8 %) plus two percentage points. (12) In accordance with Article 5 of the Protocol the data used in the current assessment of the fulfilment of the convergence criteria have to be provided by the Commission. For the preparation of this Decision the Commission provided data. Budgetary data were provided by the Commission after reporting by the Member States by 1 April 2010 in accordance with Council Regulation (EC) No 479/2009 of 25 May 2009 on the application of the Protocol on the excessive deficit procedure annexed to the Treaty establishing the European Community (10). (13) On the basis of reports presented by the Commission and the ECB on the progress made in the fulfilment by Estonia of its obligations regarding the achievement of the EMU, the Commission concluded that: (a) in Estonia, national legislation, including the Statute of the national central bank, is compatible with Articles 130 and 131 of the Treaty and with the Statute of the ESCB and of the ECB; (b) regarding the fulfilment by Estonia of the convergence criteria mentioned in the four indents of Article 140(1) of the Treaty: — the average inflation rate in Estonia in the year ending March 2010 stood at – 0,7 percent, which is well below the reference value, and it is likely to remain below the reference value in the months ahead, — Estonia is not the subject of a Council decision on the existence of an excessive deficit, with a budget deficit of 1,7 % of GDP in 2009, — Estonia has been a member of the ERM II since 28 June 2004; in the two-year period ending 23 April 2010, the Estonian kroon has not been subject to severe tensions and there has been no deviation from the ERM II central rate since the kroon’s participation, — as a result of Estonia’s very low level of gross public debt, no benchmark long-term government bonds or other appropriate securities are available to assess the durability of convergence as reflected in long-term interest rates. While financial market risk perceptions vis-à-vis Estonia increased at the height of the crisis, their development during the reference period, as well as a broader assessment on the durability of convergence, including Estonia’s fiscal policy track record and comparatively flexible economy, would support a positive assessment of Estonia’s fulfilment of the long-term interest rate criterion; (c) in the light of the assessment on legal compatibility and on the fulfilment of the convergence criteria as well as the additional factors, Estonia fulfils the necessary conditions for the adoption of the euro, HAS ADOPTED THIS DECISION: Article 1 Estonia fulfils the necessary conditions for the adoption of the euro. The derogation in favour of Estonia referred to in Article 4 of the 2003 Act of Accession is abrogated with effect from 1 January 2011. Article 2 This Decision is addressed to the Member States. Article 3 This Decision shall enter into force on the day of its publication in the Official Journal of the European Union. Done at Brussels, 13 July 2010. For the Council The President D. REYNDERS (1) OJ L 139, 11.5.1998, p. 30. (2) OJ L 167, 7.7.2000, p. 19. (3) OJ L 195, 15.7.2006, p. 25. (4) OJ L 186, 18.7.2007, p. 29. (5) OJ L 186, 18.7.2007, p. 32. (6) OJ L 195, 24.7.2008, p. 24. (7) OJ C 236, 2.8.1997, p. 5. (8) OJ C 73, 25.3.2006, p. 21. (9) OJ L 257, 27.10.1995, p. 1. (10) OJ L 145, 10.6.2009, p. 1.

Summary: Accession by Estonia to the euro (2011) Accession by Estonia to the euro (2011) Estonia fulfils the necessary conditions for the adoption of the euro. It will therefore adopt the euro as single currency from 1 January 2011. Estonia will be the seventeenth European Union Member State to adopt the euro. ACT Council Decision 2010/416/EU of 13 July 2010 in accordance with Article 140(2) of the Treaty on the adoption by Estonia of the euro on 1 January 2011 [Official Journal L 196 of 28.7.2010]. SUMMARY In this Decision, the Council states that Estonia fulfils all the necessary conditions for the adoption of the euro: Estonia fulfils the requirements established by the convergence criteria: price stability; the government budgetary position; participation in the exchange-rate mechanism of the European Monetary System; a satisfactory long-term interest rate; Estonia’s national legislation is compatible with the introduction of the euro. Consequently, Estonia will adopt the euro on 1 January 2011. Price stability Member States’ price performance must be sustainable. In order to fulfil this criterion, the annual inflation rate of the Member State must be below a reference value. This value is the average of the annual inflation rates of the three best performing Member States in terms of price stability. If the inflation rate of a candidate Member State does not exceed the reference value by more than 1.5 %, and if their performance in terms of price stability is considered to be sustainable, the criterion of price stability is fulfilled. The Council notes that the average annual inflation rate in Estonia calculated in March 2010 (-0.7 %) is well below the reference value (0.3 %) and its performance in terms of price stability is considered to be sustainable. Government budgetary position Estonia does not have an excessive budget deficit. The government budgetary position of the country is therefore satisfactory and enables the euro to be introduced. Participation in the exchange-rate mechanism of the European Monetary System This mechanism establishes a central exchange rate between the euro and Member States’ national currencies, and allows for moderate fluctuations around the central rate. Each country applying to adopt the euro must have participated in this exchange rate mechanism for at least two years without having been subject to serious tensions as regards the rate of their currency. In line with the requirements of the Treaties, the Estonian kroon joined this exchange rate mechanism in June 2004 and was not subject to serious tensions during the two-year application assessment period. Long-term interest rates Long-term interest rates are calculated on the basis of the interest rates for long-term bonds issued by Member States. However, the Council notes that the level of public debt is very low in Estonia and there is therefore no appropriate long-term interest rate available to analyse the sustainability of Estonia’s convergence. The Council therefore relied on a qualitative analysis of different economic and financial indicators as well as Estonia’s fiscal policy track record and the flexibility of its economy in order to check compliance with the long-term interest rate criterion. National legislation In addition to having to fulfil convergence criteria, the national legislation of a Member State that is applying to join the euro mechanism must also be compatible with the introduction of the single currency. In this case, the Council notes that Estonia’s internal legislation does not pose any obstacle to the introduction of the euro. It is compatible with the Statutes of the European Central Bank and the European System of Central Banks (ESCB). The ESCB is composed of the European Central Bank and the central banks of Member States. The main objective of the ESCB is to maintain price stability. Last updated: 07.10.2010