Level 1 and Level 2 legislation (Lamfalussy process)
In EU financial regulation, Level 1 is the framework regulation or directive adopted by Parliament and Council. Level 2 is the detailed delegated and implementing acts, often regulatory and implementing technical standards drafted by the ESAs. Level 3 covers ESA guidelines and Q&As, and Level 4 enforcement (a model from the Lamfalussy report).
RTS (Regulatory Technical Standards)Regulatory technical standards are detailed technical rules drafted by an ESA, such as the EBA or ESMA, under a mandate in a Level 1 act and adopted by the Commission as a delegated regulation under Article 290 TFEU. Once published in the Official Journal they bind firms directly.
ITS (Implementing Technical Standards)Implementing technical standards set uniform conditions for applying a Level 1 act, such as reporting templates, formats and procedures. An ESA drafts them and the Commission adopts them as an implementing regulation under Article 291 TFEU. The COREP and FINREP reporting framework is an ITS.
Delegated actA delegated act is a non-legislative act adopted by the European Commission under Article 290 TFEU to supplement or amend non-essential parts of a legislative act. Parliament and Council can object within a set period, usually two or three months, before it enters into force. RTS are adopted as delegated acts.
Implementing actAn implementing act is an act adopted by the European Commission under Article 291 TFEU to ensure uniform conditions for applying EU law, usually after an opinion of a committee of member state experts (comitology). ITS, such as reporting templates, are adopted as implementing acts.
ESA guidelines (comply or explain)ESA guidelines are Level 3 texts issued by the EBA, ESMA or EIOPA under Article 16 of their founding regulations to set consistent supervisory practice. National authorities must state within two months whether they comply or intend to comply, or explain why not, and firms must make every effort to comply.
Single rulebookThe single rulebook is the set of harmonised prudential and conduct rules that apply to financial institutions across the EU: Level 1 acts such as the CRR and CRD, the technical standards adopted under them, and ESA guidelines and Q&As. It aims to remove national differences inside the single market.
European Supervisory Authorities (ESAs)The European Supervisory Authorities are the EBA (banking), ESMA (securities and markets) and EIOPA (insurance and pensions), created in 2011. They draft technical standards, issue guidelines and Q&As, coordinate national supervisors and, in some areas, supervise firms directly. Their Joint Committee handles cross-sector work.
ESA guidelines (comply or explain)ESA guidelines are Level 3 texts issued by the EBA, ESMA or EIOPA under Article 16 of their founding regulations to set consistent supervisory practice. National authorities must state within two months whether they comply or intend to comply, or explain why not, and firms must make every effort to comply.