The idea to establish a body with a macroprudential mandate arose following the onset of the global financial crisis, when it became evident that the EU supervisory architecture lacks a body that would monitor risks on an aggregate level. In particular, as national supervisory authorities (such as the CNB and HANFA in Croatia) are naturally focused on domestic financial institutions and markets, the system had to be complemented by a body with a mandate to monitor risks to which all financial institutions in the European Union are exposed, either directly or indirectly. The European Systemic Risk Board (ESRB) started operating in 2011 and it was given a formal mandate for macroprudential oversight of the entire EU financial market. The ESRB is located at the European Central Bank (ECB), which provides analytical, statistical and logistic support to the work of that body.
The main ESRB body is the General Board, which is composed of representatives of the central banks and national regulatory authorities of all EU member states. Voting members at Board meetings are central bank governors, while heads of national supervisory authorities participate as non-voting members. The President of the ECB acts as the Chair of the Board. Other members of the General Board are Vice-President of the ECB, a representative of the European Commission, heads of the EBA, ESMA and EIOPA, the Chair of the Advisory Technical Committee (ATC) and the Chair of the Advisory Scientific Committee (ASC), as well as the Chair of the Economic and Financial Committee (EFC). The Croatian National Bank is represented at General Board meetings by the Governor as a voting member and the Vicegovernor responsible for bank supervision as a non-voting member. In addition to two central bank representatives, a non-voting Board member which also represents Croatia is a representative of the HANFA (which is responsible for supervision of capital markets, pension funds and insurance corporations).
An agenda item at each Board meeting is a discussion about risks and vulnerabilities, where members discuss current and potential risks to EU financial stability on the basis of various analytical materials (e.g. ECB Risk Analysis Report, ECB Surveillance Note, ATC bottom-up survey on risks and vulnerabilities). In addition to regular quarterly meetings, General Board members are often invited (in the form of written procedures or consultations) to post their comments on various analytical materials or to vote on specific issues through the common information network DARWIN. CNB representatives participated in such consultations on several occasions.
The Advisory and Technical Committee (ATC) is the ESRB working body which prepares a large number of materials serving as a basis for the General Board's decision-making. In view of the large number of permanent members, the ATC often sets up smaller working groups which are assigned with the carrying out of specific studies. Director of the CNB's Financial Stability Department is the CNB representative in the ATC.
The membership and engagement of CNB representatives in working bodies of the ESRB provides for continuous communication which results in high quality cooperation and quick responses, successful performance of assigned tasks and general effectiveness within the given framework of this international cooperation.
The ESRB has no instruments at its disposal which are legally binding for national regulatory authorities and it acts through warnings and recommendations. Although recommendations are not legally binding for EU member states, the degree of their implementation has been relatively high. Seven recommendations have been issued so far, most of which have been implemented or are being implemented by the CNB. By publishing its recommendations, the ESRB strives to encourage EU member states or bodies (e.g. ESRB recommendations are often addressed to the EBA) to implement measures associated with specific risks to financial stability.