title: Recommendation of the European Systemic Risk Board of 26 September 2019 on exchange and collection of information for macroprudential purposes on branches of credit institutions having their head office in another Member State or in a third country (ESRB/2019/18)2019/C 412/01

text:
               9.12.2019

               EN

               Official Journal of the European Union

               C 412/1

      RECOMMENDATION OF THE EUROPEAN SYSTEMIC RISK BOARD
      of 26 September 2019
      on exchange and collection of information for macroprudential purposes on branches of credit institutions having their head office in another Member State or in a third country
      (ESRB/2019/18)
      (2019/C 412/01)
      THE GENERAL BOARD OF THE EUROPEAN SYSTEMIC RISK BOARD,
      Having regard to the Treaty on the Functioning of the European Union,
      Having regard to Regulation (EU) No 1092/2010 of the European Parliament and of the Council of 24 November 2010 on European Union macroprudential oversight of the financial system and establishing a European Systemic Risk Board (1), and in particular Article 3(2)(b), (d) and (f) and Articles 16 to 18 thereof,
      Having regard to Decision ESRB/2011/1 of the European Systemic Risk Board of 20 January 2011 adopting the Rules of Procedure of the European Systemic Risk Board (2), and in particular Article 15(3)(e) and Articles 18 to 20 thereof,
      Whereas:

                  (1)

                  The ultimate objective of macroprudential policy is to contribute to the safeguarding of the stability of the financial system as a whole, including by strengthening its resilience and decreasing the build-up of systemic risks.

                  (2)

                  Regulation (EU) No 1092/2010 acknowledges 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 and grants the European Systemic Risk Board (ESRB) access to all of the information necessary to perform its duties regarding macroprudential oversight, while preserving the confidentiality of that information as required.

                  (3)

                  Other authorities entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks — including authorities which provide supporting analysis for macroprudential policy decisions — should also have access to the relevant set of data and indicators needed to perform their tasks. The information available to relevant authorities on branches in their territories differs across Member States in terms of scope and frequencies.

                  (4)

                  Recommendation ESRB/2011/3 of the European Systemic Risk Board (3) recommended, among other things, that Member States ensure that macroprudential authorities have the power to require and obtain in a timely fashion all national data and information relevant for the exercise of their tasks, including information from microprudential and securities market supervisors and information from outside the regulatory perimeter, as well as institution-specific information upon reasoned request and with adequate arrangements to ensure confidentiality. However, that Recommendation could not anticipate the various institutional arrangements relating to the setting and conduct of macroprudential policy that have evolved in the Member States since 2011. Therefore, it did not specifically address certain institutional arrangements that may be needed to ensure that macroprudential authorities have access to information that is considered to be necessary for the performance of their tasks, but that is not available to them.

                  (5)

                  Currently, the provision of cross-border financial services via branches of credit institutions having their head office in another Member State or in a third country represents an important part of the financial system in a number of Member States. In these Member States, certain branches (a) have been designated by competent authorities as significant in accordance with Article 51 of Directive 2013/36/EU of the European Parliament and of the Council (4); (b) meet the criteria of other systemically important institutions according to Article 131 of Directive 2013/36/EU; (c) provide critical functions on the basis of the European recovery and resolution framework; or (d) have a substantial market share in activities that are relevant from the financial stability perspective (together hereinafter referred to as ‘branches relevant for financial stability’). Union law does not provide a harmonised definition of branches relevant for financial stability. The provision of cross-border financial services via such branches is expected to increase in the future as financial integration within the European Union continues. Any authority entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks needs to be able to obtain certain basic information on all branches operating within its jurisdiction whose parent credit institutions have their head office in another Member State or in a third country. This is so that the authority can, as a minimum, assess whether these branches are relevant for financial stability in the country in which they operate. If the authority considers that is the case, it also needs to be able to obtain more detailed information on the activities of those branches.

                  (6)

                  Branches of credit institutions having their head office in another Member State or in a third country vary in size and importance. Where those branches are considered as relevant for financial stability in the country in which they operate there is a need to intensify the collaboration between the relevant authorities of the host and home Member States. In such cases, the exchange of selected information on parent institutions and the groups of which these branches form part is necessary to assess the potential amplifying impact that such branches might have during periods of excessive credit growth or in a crisis. The exchange of such selected information on those parent institutions and groups relating to own funds and leverage (including relevant buffer requirements), funding and liquidity risk, business strategy, and certain aspects of recovery plans is also necessary to ensure the effectiveness of macroprudential policy in the host Member States of such branches.

                  (7)

                  For these reasons, the provision of the set of information indicated in Recommendation C is considered necessary so that authorities entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks are able to fulfil their mandates. Such information should be provided to those authorities upon a reasoned request, on a need-to-know basis, and within the limits of applicable Union and national law. Where those authorities need to obtain additional information in order to carry out their tasks and monitor or assess systemic risks or for purposes of developing new policy instruments, they should be provided with that additional information upon a reasoned request.

                  (8)

                  Neither Directive 2013/36/EU, in particular Article 56 thereof, nor Regulation (EU) No 575/2013 of the European Parliament and of the Council (5) preclude or create obstacles to the exchange of information between competent authorities and authorities or bodies charged with the responsibility for maintaining the stability of the financial system in Member States, in the discharge of their supervisory functions. Although Union law provides a framework for the exchange of information between relevant authorities for microprudential purposes, no framework exists for the exchange of information for macroprudential purposes.

                  (9)

                  Central banks collect information on branches of credit institutions having their head office in another Member State or in a third country. National central banks within the European System of Central Banks are encouraged to share such information with relevant authorities upon a reasoned request and on a need-to-know basis, as this is considered to be an effective way to facilitate the exercise of their tasks.

                  (10)

                  Well-designed arrangements governing the exchange of information on branches of credit institutions having their head office in another Member State or in a third country could assist authorities entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks in carrying out their tasks. The use of memoranda of understanding would introduce standardisation and predictability, and create common ground as to what constitutes relevant information for the exercise of their tasks; memoranda of understanding are also considered to be an effective and efficient means of achieving the objective of establishing a culture of information sharing between the relevant authorities for macroprudential purposes. In this regard, the Nordic-Baltic Macroprudential Forum (6) and the most recent Memorandum of Understanding on Cooperation and Coordination on cross-border financial stability in the Nordic-Baltic region (7) could serve as reference points for a framework for close cooperation between the relevant authorities.

                  (11)

                  According to the principle of subsidiarity, the choice of relevant authority to collect information for financial stability or macroprudential purposes should be made by the relevant Member State.

                  (12)

                  Under Article 40 of Directive 2013/36/EU, competent authorities of the host Member States may require that all credit institutions having branches within their territories report to them periodically on their activities in those host Member States. This reporting may be required (i) for information and statistical purposes; (ii) for identifying branches as significant or (iii) for supervisory purposes entrusted to the host competent authority under Directive 2013/36/EU. It is not clear whether information collected under that Article can also be used for macroprudential purposes, as the relevant provision does not distinguish between microprudential and macroprudential supervision. Therefore, the European Commission should consider, within the review provided for in Article 513 of Regulation (EU) No 575/2013, whether Union law should be revised, namely to clarify that information from branches can also be collected for macroprudential purposes.

                  (13)

                  Branches of credit institutions having their head office in a third country are only subject to national law, and national laws in this matter are not harmonised by Union law. Following recent amendments to it by Directive (EU) 2019/878 of the European Parliament and of the Council (8), Article 47 of Directive 2013/36/EU specifies that a minimum set of information complemented by any other information considered necessary to enable comprehensive monitoring of the activities of the branch is to be collected by national competent authorities from branches of credit institutions having their head office in a third country. Such information should be shared with the authorities entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks, where possible and appropriate. Within its review as provided for in Article 513 of Regulation (EU) No 575/2013 — and referred to above — as to whether Union law should be revised, namely to clarify that information from branches can also be collected for macroprudential purposes, the Commission should also consider the feasibility of data collection for such purposes from branches of credit institutions having their head office in a third country.

                  (14)

                  Pursuant to Council Regulation (EU) No 1024/2013 (9) (hereinafter the ‘SSM Regulation’), the ECB is the competent authority in relation to significant credit institutions in the context of the Single Supervisory Mechanism (SSM). As such, the ECB is responsible for supervising significant credit institutions and cooperates closely with the national competent authorities (NCAs) to carry out its tasks through joint supervisory teams, which comprise staff of the ECB and of the relevant national competent authorities. This allows for the smooth and prompt exchange of information relating to the supervised credit institutions. Authorities entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks can request and obtain information from the ECB in its supervisory role on branches of credit institutions having their head office in another Member State.

                  (15)

                  Under Article 5(2) of the SSM Regulation, the ECB is responsible for assessing macroprudential measures adopted by national authorities and, when deemed necessary, for applying higher requirements for capital buffers and more stringent measures. In this regard, information on branches of credit institutions having their head office in another Member State or in a third country falls within the categories of information that may be necessary for the ECB to perform these tasks.

                  (16)

                  Competent authorities of Member States not participating in the SSM can cooperate and exchange information on supervised credit institutions in colleges of supervisors established pursuant to Articles 51 and 116 of Directive 2013/36/EU and which serve as vehicles for the coordination of supervisory tasks related to cross-border activities carried out by a credit institution.

                  (17)

                  This cross-border mechanism for sharing information is focused on the objectives of microprudential supervision. Consequently, Articles 51 and 116 of Directive 2013/36/EU and Commission Delegated Regulation (EU) 2016/98 (10), which sets out the general conditions for the functioning of colleges of supervisors, do not specifically envisage the participation of authorities entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks in the relevant supervisory colleges. Nevertheless, the relevant competent authority of the home Member State is, in principle, able to invite other entities to participate in meetings of colleges of supervisors, provided that all college members agree. Certain information relating to the credit institution to which the branch belongs and which is shared in the colleges of supervisors can be relevant for macroprudential purposes. In this regard, competent authorities are encouraged to invite relevant authorities entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks to be involved in the consideration of specific topics of macroprudential interest that are discussed in the colleges of supervisors. Explicitly including such relevant authorities in the colleges of supervisors as potential observers under Commission Delegated Regulation (EU) 2016/98 could provide greater certainty as to this role. Inviting representatives of macroprudential authorities to attend meetings of the colleges of supervisors to inform other participants about macroprudential risks or regulatory developments in macroprudential areas may also benefit discussions within the colleges of supervisors.

                  (18)

                  To ensure a consistent, efficient and effective approach to information exchange for the purposes of this Recommendation, the European Banking Authority (EBA), in cooperation with the ESRB, should develop guidelines for and monitor the exchange of information. In order to achieve a certain degree of convergence of information received from the relevant stakeholders, the EBA should establish a common framework for memoranda of understanding in cooperation with all relevant stakeholders.

                  (19)

                  This Recommendation is without prejudice to the monetary policy mandates of the central banks in the Union.

                  (20)

                  Recommendations of the ESRB are published after the addressees have been informed, and after the General Board has informed the Council of the European Union of its intention to do so and provided the Council with an opportunity to react,

            HAS ADOPTED THIS RECOMMENDATION:
      SECTION 1

         RECOMMENDATIONS

         Recommendation A — Cooperation and exchange of information on a need-to-know basis

      It is recommended that the relevant authorities:

                  1.

                  exchange information deemed necessary for the discharge of their tasks related to the adoption and/or activation of macroprudential policy measures or for other financial stability tasks, in an effective and efficient manner, as regards branches in a host Member State of credit institutions having their head office in another Member State or in a third country. The exchange of information should take place upon receipt of a reasoned request for information in relation to such branches — taking into account guidelines issued by the EBA in accordance with sub-recommendation C(1) — submitted by a relevant authority of the host Member State entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks. The information to be exchanged should be proportionate to the relevance of the branches to financial stability in the host Member State;

                  2.

                  establish memoranda of understanding or other forms of voluntary arrangements for cooperation and exchange of information among themselves — or with a relevant authority of a third country — regarding branches in the host Member State of credit institutions having their head office in another Member State or in a third country, where considered necessary and appropriate by all parties involved to facilitate the exchange of information.

         Recommendation B — Changes to the Union legal framework

      It is recommended that the European Commission:

                  1.

                  assess whether any impediments exist in Union legislation which prevent authorities entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks from having or obtaining the necessary information on branches to carry out those functions or fulfil those tasks;

                  2.

                  propose that Union legislation be amended to remove any such impediments, where the European Commission concludes, as a result of its assessment, that such impediments exist.

         Recommendation C — Guidelines for and the monitoring of exchange of information

      It is recommended that the European Banking Authority:

                  1.

                  issue guidelines in accordance with Recommendation A for the exchange of information between relevant authorities regarding branches of credit institutions having their head office in another Member State, which should include a list of information to be exchanged, as a minimum, on a need-to-know basis, and within the limits of applicable Union and national laws. The list should include, as a minimum, information items from each of the following categories

                              at the branch level:

                                          (a)

                                          assets and exposures, with breakdowns;

                                          (b)

                                          breakdowns of assets regarding borrower-based measures;

                                          (c)

                                          liabilities, with breakdowns;

                                          (d)

                                          intra-financial sector exposures;

                                          (e)

                                          information necessary to identify other systemically important institutions (O-SIIs);

                              at the parent group/parent institution level:

                                          (f)

                                          own funds and leverage;

                                          (g)

                                          funding and liquidity;

                                          (h)

                                          relevant information on branches, such as business strategy and certain elements of recovery plans of credit institutions and supervisory assessments that are relevant;

                  2.

                  monitor on a regular basis, in cooperation with the ESRB, the effectiveness and efficiency of the exchange of information between relevant authorities regarding branches of credit institutions having their head office in another Member State or in a third country.

            SECTION 2

         IMPLEMENTATION

      1.   Definitions

      For the purposes of this Recommendation the following definitions apply:

                  (a)

                  ‘branch’ means a place of business which forms a legally dependent part of a credit institution and which carries out directly all or some of the transactions inherent in the business of credit institutions;

                  (b)

                  ‘credit institution’ means a credit institution as defined in point 1 of Article 4(1) of Regulation (EU) No 575/2013;

                  (c)

                  ‘branch relevant for financial stability’ means a branch in a host Member State of a credit institution having its head office in another Member State or in a third country that meets any of the following criteria:

                              (i)

                              the competent authority of the host Member State has determined that the branch is designated as being significant in accordance with Article 51 of Directive 2013/36/EU;

                              (ii)

                              the competent or designated authority of the host Member State has determined that the branch meets the criteria referred to in Article 131(3) of Directive 2013/36/EU for the identification of other systemically important institutions (O-SIIs), in accordance with Guidelines EBA/GL/2014/10 of the European Banking Authority (11);

                              (iii)

                              the national resolution authority of the host Member State has determined that in the host Member State the branch provides critical functions within the meaning of point 35 of Article 2(1) of Directive 2014/59/EU of the European Parliament and of the Council (12);

                              (iv)

                              the branch has a market share exceeding 2 % of any one or more of the categories of exposures set out in points (a) and (b) of Article 133(5) of Directive 2013/36/EU (13);

                  (d)

                  ‘host Member State’ means host Member State as defined in point (44) of Article 4(1) of Regulation (EU) No 575/2013;

                  (e)

                  ‘home Member State’ means home Member State as defined in point (43) of Article 4(1) of Regulation (EU) No 575/2013;

                  (f)

                  ‘competent authority’ means a public authority or body officially recognised by national law, which is empowered by national law to supervise credit institutions as part of the supervisory system in operation in the Member State concerned, and the ECB under Article 9(1) of Regulation (EU) No 1024/2013;

                  (g)

                  ‘memorandum of understanding’ means a voluntary arrangement setting forth how the relevant authorities intend to cooperate with one another and specifying the details of the data and information to be exchanged, in line with the applicable laws and regulations;

                  (h)

                  ‘relevant authority’ means:

                              1.

                              an authority entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks, such as related supporting analysis, including but not limited to:

                                          (i)

                                          a designated authority pursuant to Chapter 4 of Title VII of Directive 2013/36/EU or Article 458(1) of Regulation (EU) No 575/2013;

                                          (ii)

                                          the ECB under Article 9(1) of Regulation (EU) No 1024/2013;

                                          (iii)

                                          a macroprudential authority with the objectives, arrangements, tasks, powers, instruments, accountability requirements and other characteristics set out in Recommendation ESRB/2011/3;

                              2.

                              a competent authority.

            2.   Criteria for implementation

                  1.

                  The following criteria apply to the implementation of this Recommendation:

                              (a)

                              due regard should be paid to the need-to-know principle and the principle of proportionality, taking into account the objective and the content of each recommendation;

                              (b)

                              the specific compliance criteria set out in the Annex in relation to each Recommendation should be met.

                  2.

                  Addressees are requested to report to the ESRB and to the Council on the actions undertaken in response to this Recommendation, or adequately justify any inaction. The reports should as a minimum contain:

                              (a)

                              information on the substance and timeline of the actions undertaken;

                              (b)

                              an assessment of the functioning of the actions undertaken, having regard to the objectives of this Recommendation;

                              (c)

                              a detailed justification of any inaction or departure from this Recommendation, including any delays.

            3.   Timeline for the follow-up

      Addressees are requested to report to the ESRB and to the Council on the actions taken in response to this Recommendation, or adequately justify any inaction, in compliance with the following timelines:
      1.   Recommendation A

                  (a)

                  By 31 December 2020, the relevant authorities are requested to deliver to the ESRB and to the Council an interim report on the implementation of Recommendation A.

                  (b)

                  By 31 December 2024, the relevant authorities are requested to deliver to the ESRB and to the Council a final report on the implementation of Recommendation A, taking into account the potential changes to national and EU law and to the EBA guidelines.

            2.   Recommendation B

      By 31 December 2022, the Commission is requested to deliver to the ESRB and to the Council a report on the implementation of Recommendation B.
      3.   Recommendation C

      By 31 December 2023, the EBA is requested to deliver to the ESRB and to the Council a report on the implementation of Recommendation C.
      4.   Monitoring and assessment

                  1.

                  The ESRB Secretariat will:

                              (a)

                              assist the addressees, ensuring the coordination of reporting and the provision of relevant templates, and detailing where necessary the procedure and the timeline for the follow-up;

                              (b)

                              verify the follow-up by the addressees, provide assistance at their request, and submit follow-up reports to the General Board via the Steering Committee.

                  2.

                  The General Board will assess the actions and justifications reported by the addressees and, where appropriate, may decide that this Recommendation has not been followed and that an addressee has failed to provide adequate justification for its inaction.

         Done at Frankfurt am Main, 26 September 2019.

               Head of the ESRB Secretariat, on behalf of the General Board of the ESRB

            Francesco MAZZAFERRO

         (1)  OJ L 331, 15.12.2010, p. 1.

         (2)  OJ C 58, 24.2.2011, p. 4.

         (3)  Recommendation ESRB/2011/3 of the European Systemic Risk Board of 22 December 2011 on the macro-prudential mandate of national authorities (OJ C 41, 14.2.2012, p. 1).

         (4)  Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338).

         (5)  Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1).

         (6)  The Nordic-Baltic Macroprudential Forum (NBMF) is a regional cooperation body that brings together central bank governors and heads of supervisory authorities. The NBMF regularly discusses financial stability risks in the Nordic and Baltic area and in specific countries, as well as macroprudential measures and their reciprocation as a means of addressing these risks and enhancing regional coordination.

         (7)  Memorandum of Understanding on Cooperation and Coordination on cross-border financial stability between relevant Ministries, Central Banks, Financial Supervisory Authorities and Resolution Authorities of Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway and Sweden, dated 31 January 2018.

         (8)  Directive (EU) 2019/878 of the European Parliament and of the Council of 20 May 2019 amending Directive 2013/36/EU as regards exempted entities, financial holding companies, mixed financial holding companies, remuneration, supervisory measures and powers and capital conservation measures (OJ L 150, 7.6.2019, p. 253).

         (9)  Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63).

         (10)  Commission Delegated Regulation (EU) 2016/98 of 16 October 2015 supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards for specifying the general conditions for the functioning of colleges of supervisors (OJ L 21, 28.1.2016, p. 2).

         (11)  Guidelines of the European Banking Authority of 16 December 2014 on the criteria to determine the conditions of application of Article 131(3) of Directive 2013/36/EU (CRD) in relation to the assessment of other systemically important institutions (O-SIIs) (EBA/GL/2014/10).

         (12)  Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190).

         (13)  As amended by Directive (EU) 2019/878.

         ANNEX
         COMPLIANCE CRITERIA FOR THE RECOMMENDATIONS

            Recommendation A — Cooperation and exchange of information on a need-to-know basis

         For Recommendation A, the following compliance criteria are specified.

            Sub-recommendation A(1) — Effectiveness, efficiency and proportionality in the exchange of information

                     1.

                     Relevant authorities should, following a reasoned request from an authority entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks, collect and exchange as a minimum the following categories of information, as applicable: the information set out in points (a) to (e) of sub-recommendation C(1) in relation to all branches, and, in addition, the information set out in points (f) to (h) of sub-recommendation C(1) in relation to branches relevant for financial stability.

                     2.

                     Relevant authorities should report to the ESRB and to the EBA any issues encountered during the exchange of information.

                     3.

                     Once the EBA publishes guidelines in line with sub-recommendation C(1), relevant authorities should exchange as a minimum the set of information referred to in those guidelines, following a reasoned request from an authority entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks.

                     4.

                     The following guiding principles should be observed when exchanging information:

                                 a.

                                 the exchange of information should be based on a reasoned request from an authority entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks in the host Member State and the requested information should be necessary for the exercise of those tasks, taking into account the need-to-know principle;

                                 b.

                                 the information to be exchanged should be proportionate to the relevance of the branches for financial stability in the Member State requesting the information;

                                 c.

                                 authorities entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks should take account of available information before requesting information from other relevant authorities;

                                 d.

                                 relevant authorities should provide the requested information without undue delay;

                                 e.

                                 relevant authorities should, within the limits of the applicable legal framework, use their powers to collect the requested information if it is not readily available to the relevant authorities;

                                 f.

                                 relevant authorities should make use of existing reporting templates whenever possible;

                                 g.

                                 relevant authorities should transfer data in user-friendly formats that allow further automatic processing of the data;

                                 h.

                                 relevant authorities should make arrangements to allow confidential transfer of information, if required;

                                 i.

                                 the receiving authority should ensure at least the same level of confidentiality for the information as is applied by the authority providing the information.

                     5.

                     Inaction by authorities entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks in host Member States will be deemed sufficiently explained where there is evidence that there are no branches relevant for financial stability in their Member State or if the authorities declare that they have all information necessary for the carrying out of their tasks. Inaction by relevant authorities will be deemed sufficiently explained if they have not received a reasoned request for information from a relevant host Member State authority entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks.

            Sub-recommendation A(2) — Mechanisms for cooperation and exchange of information

                     1.

                     The relevant authorities should ensure that any voluntary arrangements, such as memoranda of understanding, establish, inter alia, a general principle of mutual exchange of information in line with the principles on cooperation between relevant authorities and the standards for exchange of information upon request that are set out in sub-recommendation A(1).

                     2.

                     Relevant authorities will be deemed to comply with sub-recommendation A(2) where they provide evidence of such voluntary arrangements or declare that they have the power to freely exchange the information pursuant to sub-recommendation A(1) without establishing such voluntary arrangements.

                     3.

                     Inaction by relevant authorities will be deemed sufficiently explained where there is evidence that there are no branches relevant for financial stability in their Member State, or if the authorities entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks declare that they have all information necessary for the carrying out of their tasks, or that no reasoned request for information was made or received.

            Recommendation B — Changes to the Union legal framework

         For Recommendation B, the following compliance criteria are specified.
         The European Commission should assess whether changes to Union legislation are necessary to ensure that authorities entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks have the necessary information to fulfil their tasks, so that, as a minimum:

                     1.

                     information relating to the categories listed in sub-recommendation C(1) and to be developed by the EBA can be collected on a regular basis upon a reasoned request from an authority entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks;

                     2.

                     additional information can be collected based on an ad-hoc reasoned request by authorities entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks;

                     3.

                     the collection and/or exchange of information in accordance with Recommendation A, as well as of information not available to relevant authorities, is possible, in particular with regard to Articles 40, 47 and 56 of Directive 2013/36/EU, as well as Article 84 of Directive 2014/59/EU, in particular as regards the exchange of information on certain elements of recovery plans (1);

                     4.

                     the definition of a significant branch for the purposes of Article 51 of Directive 2013/36/EU properly accounts for financial stability considerations in the host Member State;

                     5.

                     it is clear that authorities entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks can participate in colleges of supervisors as observers with regard to Articles 51 and 116 of Directive 2013/36/EU.

               The European Commission should also consider incorporating information set out in the list to be developed by the EBA under sub-recommendation C(1) into Commission Delegated Regulation (EU) 2016/98, Commission Implementing Regulation (EU) 2016/99 (2) and Commission Implementing Regulation (EU) No 680/2014 (3) to ensure that competent authorities have access to the same set of information as authorities entrusted with the adoption and/or activation of macroprudential policy measures or with other financial stability tasks.

            Recommendation C — Guidelines for and the monitoring of exchange of information

         For Recommendation C, the following compliance criteria are specified.

            Sub-recommendation C(1) — Guidelines on exchange of information

         The guidelines for the exchange of information to be issued by the EBA should include, but not be limited to:

                     (a)

                     a template memorandum of understanding that can be used by the parties involved in exchange of information and can accommodate further adjustments as deemed necessary by those parties;

                     (b)

                     additional principles for effective and efficient exchange of information;

                     (c)

                     reporting formats and templates for exchange of information;

                     (d)

                     specification of the minimum set of information set out in sub-recommendation C(1), including a list of items to be exchanged following a reasoned request for all branches, and a list of items to be exchanged following a reasoned request for branches relevant for financial stability.

            Sub-recommendation C(2) — Monitoring of the effectiveness and efficiency of exchange of information

                     1.

                     The EBA should, in cooperation with the ESRB, monitor the efficiency and effectiveness of the exchange of information between relevant authorities based on information provided by those authorities.

                     2.

                     Based on the information received from the relevant authorities under the compliance criteria 2 relevant to sub-recommendation A(2) and the information received from the ESRB, the EBA should report periodically, at least annually, to the ESRB on the effectiveness and efficiency of the exchange of information between relevant authorities, including the number of requests for information and response time, and on memoranda of understanding that have been concluded.

            (1)  Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190).

            (2)  Commission Implementing Regulation (EU) 2016/99 of 16 October 2015 laying down implementing technical standards with regard to determining the operational functioning of the colleges of supervisors according to Directive 2013/36/EU of the European Parliament and of the Council (OJ L 21, 28.1.2016, p. 21).

            (3)  Commission Implementing Regulation (EU) No 680/2014 of 16 April 2014 laying down implementing technical standards with regard to supervisory reporting of institutions according to Regulation (EU) No 575/2013 of the European Parliament and of the Council (OJ L 191, 28.6.2014, p. 1).


title: Commission Recommendation (EU) 2020/403 of 13 March 2020 on conformity assessment and market surveillance procedures within the context of the COVID-19 threat

text:
               16.3.2020

               EN

               Official Journal of the European Union

               LI 79/1

      COMMISSION RECOMMENDATION (EU) 2020/403
      of 13 March 2020
      on conformity assessment and market surveillance procedures within the context of the COVID-19 threat
      THE EUROPEAN COMMISSION,
      Having regard to the Treaty on the Functioning of the European Union, and in particular Article 292 thereof,
      Whereas:

                  (1)

                  In the context of the current COVID-19 global outbreak as well as the rapid spread of the virus across various regions of the EU, the demand for personal protective equipment (hereinafter ‘PPE’) such as face masks, gloves, protective coveralls or eyewear protection, as well as for medical devices such as surgical masks, exploration gloves and some gowns, has seen an exponential growth. In particular, the supply chain of certain types of PPE such as the disposable face masks is under severe strain, due to the exponential growth of the demand both via existing as well as via new channels. In addition, the global supply chain of such products has also sustained significant disruptions, which have induced repercussions on the EU market as well.

                  (2)

                  Bearing in mind that the health and safety of the EU citizens is of upmost priority, it is of paramount importance to ensure that the most appropriate PPE and medical devices ensuring adequate protection are swiftly made available to those who need it most.

                  (3)

                  Economic operators active across the EU are working relentlessly to increase their respective manufacturing and distribution capacity. In order to mitigate the effects of the various disruptive factors, the economic operators are redesigning their supply chains by launching new manufacturing lines and/or diversifying their supplier base. These efforts by the industrial stakeholders would not be able to produce their full effects if the increased supply cannot feed into the market without any undue delays.

                  (4)

                  The requirements for the design, manufacturing and placing on the market of personal protective equipment are laid down by Regulation (EU) 2016/425 of the European Parliament and of the Council of 9 March 2016 on personal protective equipment and repealing Council Directive 89/686/EEC (1).

                  (5)

                  The requirements for the design, manufacturing and placing on the market of medical devices are laid down by Council Directive 93/42/EEC of 14 June 1993 concerning medical devices (2). That Directive is repealed by Regulation (EU) 2017/745 of the European Parliament and of the Council of 5 April 2017 on medical devices, amending Directive 2001/83/EC, Regulation (EC) No 178/2002 and Regulation (EC) No 1223/2009 and repealing Council Directives 90/385/EEC and 93/42/EEC (3), with effect from 26 May 2020.

                  (6)

                  Disposable and re-usable face masks ensuring protection against particulate hazards, disposable and re-usable coveralls, gloves and eyewear protection, which are used for prevention and protection against harmful biological agents such as viruses are products falling within the scope of the Regulation (EU) 2016/425.

                  (7)

                  Surgical masks, examination gloves and some types of gowns are products falling within the scope of Directive 93/42/EEC and of Regulation (EU) 2017/745.

                  (8)

                  In the context of the COVID-19 threat, such PPE and medical devices are essential for healthcare workers, first responders and other personnel involved in the efforts to contain the virus and avoid its further spread.

                  (9)

                  Regulation (EU) 2016/425 fully harmonises the rules for the design, manufacturing and placing on the Union market of PPE and sets out a number of essential health and safety requirements for PPE based on a classification of PPE depending on the risk against which it is intended to protect users. Thus, items of PPE manufactured in accordance with the Regulation (EU) 2016/425 can circulate freely throughout the internal market and Member States may not introduce additional and diverging requirements regarding the manufacturing and placement on the market of such products.

                  (10)

                  Directive 93/42/EEC and Regulation (EU) 2017/745 fully harmonise the rules for the design, manufacturing and placing the Union market of medical devices, and set up a number of essential requirements and of general safety and performance requirements, based on a classification of medical devices depending on specific rules governed by the intended purpose of the devices. Thus, devices manufactured in accordance with the Council Directive 93/42/EEC and Regulation (EU) 2017/745 can circulate freely throughout the internal market and Member States may not introduce additional and diverging requirements regarding the manufacturing and placement on the market of such products.

                  (11)

                  PPE intended to protect against harmful biological agents, such as viruses are listed in Annex I of Regulation (EU) 2016/425 as category III, which includes exclusively the risks that may cause ‘very serious consequences such as death or irreversible damage to health’.

                  (12)

                  Relevant medical devices as non-invasive devices are in Class I, unless specific rules apply.

                  (13)

                  In accordance with Article 8 of Regulation (EU) 2016/425, in order to place PPE products on the market, manufacturers shall carry out the applicable conformity assessment procedures and, where compliance with the applicable essential health and safety requirements has been demonstrated by the appropriate procedure, affix the CE marking.

                  (14)

                  In accordance with Article 11 of Directive 93/42/EEC and with Article 52 of Regulation (EU) 2017/745, once the latter becomes applicable, in order to place medical devices on the market, manufacturers shall carry out the applicable conformity assessment procedures and, where compliance with the applicable essential requirements or general safety and performance requirements has been demonstrated by the appropriate procedure, affix the CE marking. Derogations from conformity assessment procedures may be authorised by Member States, on duly justified request, for the placing on the market and putting into service, within the territory of the Member State concerned, of individual devices the use of which is in the interest of protection of health.

                  (15)

                  Regulation (EU) 2016/425 is technologically neutral and does not lay down any specific mandatory technical solutions for the design of PPE products. Instead, Annex II to Regulation (EU) 2016/425 sets the essential health and safety requirements, which PPE should meet in order to be able to be placed on the market and to circulate freely across the entire EU market.

                  (16)

                  Directive 93/42/EEC and Regulation (EU) 2017/745 are technologically neutral and do not lay down any specific mandatory technical solutions for the design of medical devices. Instead, Annex I to Directive 93/42/EEC sets the essential requirements, and Annex I to Regulation (EU) 2017/745 sets the general safety and performance requirements, which medical devices should meet in order to be able to be placed on the market and to circulate freely across the entire EU market.

                  (17)

                  Article 14 of Regulation (EU) 2016/425 offers the possibility for manufacturers to rely on specific technical solutions, which are detailed in harmonised standards or parts thereof the references of which have been published in the Official Journal of the European Union. In accordance with this Article, should a manufacturer choose to adopt such a technical solution, the PPE is presumed to be in conformity with the essential health and safety requirements covered by the said harmonised standard or parts thereof. However, compliance with the harmonised standards is not mandatory. Manufacturers are free to choose other technical solutions provided that the specific solution which is retained ensures that the PPE complies with the applicable essential health and safety requirements.

                  (18)

                  Article 5 of Directive 93/42/EEC and Article 8 of Regulation (EU) 2017/745 offer the possibility for manufacturers to rely on specific technical solutions, which are detailed in harmonised standards or parts thereof the references of which have been published in the Official Journal of the European Union. In accordance with this Article, should a manufacturer choose to adopt such a technical solution, the medical device is presumed to be in conformity with the requirements covered by the said harmonised standard or parts thereof. However, compliance with the harmonised standards is not mandatory. Manufacturers are free to choose other technical solutions provided that the specific solution which is retained ensures that the medical device complies with the applicable essential health and safety requirements.

                  (19)

                  Article 19 of Regulation (EU) 2016/425 lays down the specific conformity assessment procedures, which apply to the different categories of PPE. Pursuant to this Article, items of PPE of category III, such as the ones designed protect against harmful biological agents should be subjected to specific combination of conformity assessment procedures, which are described respectively in Annexes V, VII and VIII of the same Regulation. Each of the different conformity assessment procedures, which may be used, require the mandatory involvement of a third party conformity assessment body.

                  (20)

                  Article 11 of Directive 93/42/EEC and Article 52 of Regulation (EU) 2017/745, once the latter becomes applicable, lay down the specific conformity assessment procedures, which apply to the different classes of medical devices. Pursuant to these Articles, medical devices falling within Class I, other than custom-made or investigational devices, should be subjected to the conformity assessment procedure for the EC declaration of conformity, without the involvement of a third party conformity assessment body.

                  (21)

                  Notified bodies are the conformity assessment bodies designated by Member States and authorised to carry out third party conformity assessment tasks under Regulation (EU) 2016/425. According to Article 26(4) and point 7 (f) of Annex V of Regulation (EU) 2016/425, notified bodies are required to assess that a PPE product meets the applicable essential health and safety requirements. Notified bodies need to carry out this assessment not only where the manufacturer has applied the harmonised standards, but also in a situation where the manufacturer has followed other technical solutions. When delivering the conformity assessment certificates, notified bodies are required to inform their notifying authorities and may also be required to inform other notified bodies of the certificates they have issued, as set out in Article 34 of Regulation (EU) 2016/425.

                  (22)

                  Notified bodies should thus assess whether products manufactured in line with other technical solutions, such as the ones contained in the WHO recommendations on the appropriate selection of PPE also meet the applicable essential health and safety requirements. In view of the importance to ensure an efficient exchange of information between all stakeholders in the PPE supply chain, where notified bodies conclude that a PPE following another specific standard or technical solution is compliant with the essential health and safety requirements applicable to it, sharing this information will be instrumental in facilitating the assessment of other products manufactured according to the same specific standard or technical solution in a swift manner. To that effect, notified bodies can make use of the existing channels for exchange of information in the framework of the coordination groups established in accordance with Article 36 of Regulation (EU) 2016/425.

                  (23)

                  In addition, pursuant to the relevant market surveillance procedures in Regulation (EU) 2016/425 and in particular Article 38(1) and (2) thereof, where a market surveillance authority encounters a non-CE marked PPE product they are required to evaluate it. Where, in the course of the evaluation, the market surveillance authorities find that the PPE does not comply with the requirements laid down in the Regulation, they shall require the economic operator to take corrective action to bring the PPE into compliance or to recall or withdraw it, commensurate with the nature of the risk. They shall also inform the Commission and other Member State of the results of the evaluation and the actions which they have required the economic operator to take.

                  (24)

                  Accordingly, to address the shortage of PPE necessary in the context of the COVID-19 outbreak, where non-CE marked PPE are intended to enter the EU market, the relevant market surveillance authorities should evaluate the products and, if they are found to be compliant with the essential health and safety requirements laid down by the relevant Regulation should take measures allowing the placing of such PPE on the Union market for a limited period of time or while the conformity assessment procedure with the notified body is being carried out. In order to ensure that such products can be made available in other Member States and in view of the importance to ensure an efficient exchange of information as well as a coordinated response to all threats to the citizens’ health and safety, it is appropriate that the market surveillance authority carrying out such an evaluation communicates its decision to other Member States authorities and to the Commission through the regular market surveillance information exchange channels.

                  (25)

                  Considering that certain types of PPE or medical devices that are used in the context of the COVID-19 outbreak, may also be used for other purposes, it is necessary that Member States take all appropriate measures to ensure that PPE or medical devices not bearing the CE marking, which may be placed on the Union market in accordance with paragraph 8 of the present Recommendation are only made available to healthcare workers,

            HAS ADOPTED THIS RECOMMENDATION:
      1.   With the objective to ensure availability of PPE and medical devices for adequate protection in the COVID-19 outbreak, the Commission invites all economic operators throughout the supply chain, as well as notified bodies and market surveillance authorities to deploy all the measures at their disposal to support the efforts aimed at ensuring that the supply of PPE and medical devices throughout the EU market will match the continuously increasing demand. Such measures should nevertheless not have a detrimental effect on the overall level of health and safety and all relevant stakeholders should ensure that any PPE or medical devices, which is being placed on the EU market, continues to provide an adequate level of protection of the users’ health and safety.

         CONFORMITY ASSESSMENT PROCEDURES

                  2.

                  The notified bodies under Regulation (EU) 2016/425 should prioritise and swiftly conduct the conformity assessment activities in the framework of all newly submitted requests by economic operators of PPE necessary for protection in the context of the COVID-19 outbreak.

                  3.

                  In the case of PPE products manufactured following technical solutions other than harmonised standards, the WHO recommendations on the appropriate selection of PPE may be used as a potential source of reference for such technical solutions, provided that the said technical solutions ensure an adequate level of protection corresponding to the applicable essential health and safety requirements laid down in Regulation (EU) 2016/425.

                  4.

                  Notified bodies which issue certificates to PPE products manufactured following other technical solutions than harmonised standards, should immediately inform the relevant notifying authority as well as the other notified bodies under Regulation (EU) 2016/425 of the certificates issued and the specific technical solution followed. Notified bodies should exchange such information through the coordination of notified bodies group established under Article 36 of Regulation (EU) 2016/425.

                  5.

                  In the case of medical devices, the possibility for Member States to authorise derogations from conformity assessment procedures should also be considered, according to Article 11(13) of Directive 93/42/EEC and Article 59 of Regulation (EU) 2017/745 once the latter becomes applicable, also when the intervention of a notified body is not required.

         MARKET SURVEILLANCE PROCEDURES

                  6.

                  The relevant market surveillance authorities in the Member States should as a matter of priority focus on non-compliant PPE or medical devices raising serious risks as to the health and safety of their intended users.

                  7.

                  Where market surveillance authorities find that PPE or medical devices ensure an adequate level of health and safety in accordance with the essential requirements laid down in Regulation (EU) 2016/425 or the requirements of Directive 93/42/EEC or Regulation (EU) 2017/745, even though the conformity assessment procedures, including the affixing of CE marking have not been fully finalised according to the harmonised rules, they may authorise the making available of these products on the Union market for a limited period of time and while the necessary procedures are being carried out.

                  8.

                  PPE or medical devices not bearing the CE marking could also be assessed and part of a purchase organised by the relevant Member State authorities provided that is ensured that such products are only available for the healthcare workers for the duration of the current health crisis and that they are not entering the regular distribution channels and made available to other users.

                  9.

                  Market surveillance authorities should inform immediately the Commission and other Member States of any temporary arrangement they have granted to specific PPE or medical devices. For PPE, this should be done through the Information and Communication System for Market Surveillance (ICSMS).

         Done at Brussels, 13 March 2020.

               For the Commission

            Thierry BRETON

               Member of the Commission

         (1)  Regulation (EU) 2016/425 of the European Parliament and of the Council of 9 March 2016 on personal protective equipment and repealing Council Directive 89/686/EEC, OJ L 81, 31.3.2016, p. 51.

         (2)  OJ L 169, 12.7.1993, p. 1.

         (3)  OJ L 117, 5.5.2017, p. 1.


title: Council Recommendation of 9 July 2019 on the 2019 National Reform Programme of Belgium and delivering a Council opinion on the 2019 Stability Programme of Belgium

text:
               5.9.2019

               EN

               Official Journal of the European Union

               C 301/1

      COUNCIL RECOMMENDATION
      of 9 July 2019
      on the 2019 National Reform Programme of Belgium and delivering a Council opinion on the 2019 Stability Programme of Belgium
      (2019/C 301/01)
      THE COUNCIL OF THE EUROPEAN UNION,
      Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 121(2) and 148(4) thereof,
      Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies (1), and in particular Article 5(2) thereof,
      Having regard to the recommendation of the European Commission,
      Having regard to the resolutions of the European Parliament,
      Having regard to the conclusions of the European Council,
      Having regard to the opinion of the Employment Committee,
      Having regard to the opinion of the Economic and Financial Committee,
      Having regard to the opinion of the Social Protection Committee,
      Having regard to the opinion of the Economic Policy Committee,
      Whereas:

                  (1)

                  On 21 November 2018, the Commission adopted the Annual Growth Survey, marking the start of the 2019 European Semester for economic policy coordination. It took due account of the European Pillar of Social Rights, proclaimed by the European Parliament, the Council and the Commission on 17 November 2017. The priorities of the Annual Growth Survey were endorsed by the European Council on 21 March 2019. On 21 November 2018, on the basis of Regulation (EU) No 1176/2011 of the European Parliament and of the Council (2), the Commission also adopted the Alert Mechanism Report, in which it did not identify Belgium as one of the Member States for which an in-depth review would be carried out. On the same date, the Commission also adopted a recommendation for a Council recommendation on the economic policy of the euro area, which was endorsed by the European Council on 21 March 2019. On 9 April 2019, the Council adopted the Recommendation on the economic policy of the euro area (3) (‘2019 Recommendation for the euro area’) which sets out five euro-area recommendations (‘the euro-area recommendations’).

                  (2)

                  As a Member State whose currency is the euro and in view of the close interlinkages between the economies in the economic and monetary union, Belgium should ensure the full and timely implementation of the 2019 Recommendation for the euro area, as reflected in recommendations (1) to (4) below. In particular, measures to improve services will help address the first euro-area recommendation as regards resilient services markets, measures to improve the sustainability, efficiency and composition of public finances as well as using windfall gains to reduce public debt will help address the second euro-area recommendation as regards supporting investment, improving public finances, rebuilding fiscal buffers and measures to strengthen the effectiveness of labour market policies will help address the third euro-area recommendation as regards supporting successful labour market transitions.

                  (3)

                  The 2019 country report for Belgium was published on 27 February 2019. It assessed Belgium’s progress in addressing the country-specific recommendations adopted by the Council on 13 July 2018 (4), the follow-up given to the country-specific recommendations adopted in previous years and Belgium’s progress towards its national Europe 2020 targets.

                  (4)

                  On 26 April 2019, Belgium submitted its 2019 National Reform Programme and its 2019 Stability Programme. In order to take account of their interlinkages, the two programmes have been assessed at the same time.

                  (5)

                  Relevant country-specific recommendations have been addressed in the programming of the European Structural and Investment Funds (‘ESI Funds’) for the 2014-2020 period. As provided for in Article 23 of Regulation (EU) No 1303/2013 of the European Parliament and of the Council (5), where it is necessary to support the implementation of relevant Council recommendations, the Commission may request a Member State to review and propose amendments to its Partnership Agreement and relevant programmes. The Commission has provided further details on how it would make use of that provision in guidelines on the application of the measures linking the effectiveness of the ESI Funds to sound economic governance.

                  (6)

                  Belgium is currently in the preventive arm of the Stability and Growth Pact and subject to the debt rule. In its 2019 Stability Programme, the government plans a gradual improvement of the headline balance from a deficit of 0,7 % of gross domestic product (GDP) in 2018 to 0,0 % of GDP in 2022. Based on the recalculated structural balance (6), the medium-term budgetary objective, set at a balanced budgetary position in structural terms, is not planned to be achieved over the period covered by the 2019 Stability Programme. After having peaked at almost 107 % of GDP in 2014 and decreasing to 102 % of GDP in 2018, the general government debt-to-GDP ratio is expected to decline to 94 % by 2022 according to the 2019 Stability Programme. The macroeconomic scenario underpinning those budgetary projections is plausible. At the same time, the measures needed to support the planned deficit targets from 2020 onwards have not been specified, which contributes to the projected deterioration of the structural balance in 2020 under unchanged policies according to the Commission 2019 spring forecast.

                  (7)

                  On 5 June 2019, the Commission issued a report prepared in accordance with Article 126(3) of the Treaty due to Belgium’s non-compliance with the debt rule in 2018. The report concluded, following an assessment of all the relevant factors, that the current analysis is not fully conclusive as to whether the debt criterion as defined in the Treaty and in Regulation (EC) No 1467/1997 has been complied with.

                  (8)

                  In its 2019 Stability Programme, Belgium confirms the request made in its 2019 Draft Budgetary Plan to avail itself of the flexibility under the preventive arm pursuant to the ‘Commonly agreed position on Flexibility within the Stability and Growth Pact’ endorsed by the Council on 12 February 2016. Belgium requested a temporary deviation of 0,5 % of GDP from the adjustment path towards the medium-term budgetary objective in view of the implementation of major structural reforms with a positive impact on the long-term sustainability of public finances. The structural reforms refer to a pension reform, a ‘tax shift’, a reform of corporate income taxation, a labour market reform as well as a reform of the public administration. The Commission 2019 spring forecast confirms that Belgium respects the minimum benchmark in 2019, providing a safety margin towards the 3 %-of- GDP deficit threshold. All the measures have now been fully legislated for, with the exception of the reform of the public administration. Given their nature, and in particular the tax shift and its corporate income tax reform, there are still uncertainties surrounding their short-term impact, particularly given their non-budgetary neutral nature, which has worsened the budgetary position. Nevertheless, the measures have enhanced the economy’s growth potential, lowered the unemployment rate and reduced the risks of macroeconomic imbalances, thereby having a positive impact on debt sustainability in the medium to long term. On this basis, Belgium can currently be assessed as qualifying for the requested temporary deviation of 0,5 % of GDP in 2019, provided that it adequately implements the agreed reforms, which will be monitored under the European Semester.

                  (9)

                  On 13 July 2018, the Council recommended Belgium to ensure that the nominal growth rate of net primary government expenditure (7) does not exceed 1,8 % in 2019, corresponding to an annual structural adjustment of 0,6 % of GDP. As Belgium qualifies for the requested temporary deviation of 0,5 % of GDP under the structural reform clause, the required structural adjustment for 2019 can be reduced to 0,1 % of GDP, corresponding to a nominal growth rate of net primary expenditure that does not exceed 2,8 % in 2019. Based on the Commission 2019 spring forecast, there is a risk of a significant deviation from the recommended adjustment path towards the medium-term budgetary objective over 2018 and 2019 taken together.

                  (10)

                  In 2020, in view of Belgium’s general government debt ratio above 60 % of GDP and projected output gap of 0,1 %, the nominal growth rate of net primary government expenditure should not exceed 1,6 %, in line with the structural adjustment of 0,6 % of GDP stemming from the commonly agreed adjustment matrix of requirements under the Stability and Growth Pact. Based on the Commission 2019 spring forecast under unchanged policies, there is a risk of a significant deviation from that requirement in 2020. Belgium is prima facie not forecast to comply with the debt rule in 2019 and 2020. Overall, the Council is of the opinion that the necessary measures should be taken as of 2019 to comply with the provisions of the Stability and Growth Pact. It would be important to use any windfall gains to further reduce the general government debt ratio. The medium- and long-term sustainability of Belgium’s public finances continues to be at risk due to the combination of a high debt-to-GDP ratio and the projected rise in ageing costs, in particular those linked to pensions and long-term care. A set of pension reforms was legislated in 2015, leading to an increase of the statutory retirement age from 65 to 66 years as from 2025 and to 67 as from 2030. Moreover, age and seniority requirements to benefit from early retirement were also made stricter. Nevertheless public expenditure on pensions would still increase by 2,9 percentage points of GDP between 2016 and 2070, mostly during the next two decades. Furthermore, early retirement conditions for several large groups of civil servants remain more favourable than the standard conditions. Public spending on long-term care is projected to increase by 1,7 percentage points of GDP between 2016 and 2070, an above average increase starting from what is already one of the highest levels in the Union. The organisational fragmentation of long-term care, with competences currently spread across different administrative levels, challenges some dimensions of spending efficiency, hence the net impact of the recent transfer of responsbilities is not yet clear. Strengthening governance would help to achieve the intended efficiency gains. There might be room to optimise the care mix to increase the cost-efficiency of the long-term care system.

                  (11)

                  The composition and efficiency of public spending can be improved in order to create space for more public investment. In spite of a recent decrease, total expenditure as a share of GDP in Belgium remains among the highest in the euro area. The high level of public expenditure suggests that there is scope for a more spending-based fiscal adjustment. Given the high level of public expenditure, the outcomes of certain policies and the quality of certain public services raise questions of cost efficiency. Spending reviews and policy evaluations can help Belgium prioritise and improve the efficiency of public expenditure. Furthermore, spending reviews could be used to assess the efficiency of the indirect public support for business Research and Development, which is one of the highest in the Union, as a percentage of GDP and which continued to increase last year. Federal and regional authorities have recently expressed interest in integrating spending review in their budgetary mechanism.

                  (12)

                  Budget coordination between entities is currently not sufficiently flexible to create room for public investment in large-scale projects. Effective budget coordination is essential in a federal Member State like Belgium, where a large part of the spending power has been devolved to sub-national governments. There is still no formal agreement on annual targets at all levels of government, in spite of the cooperation agreement signed in 2013, complicating budget coordination. In contrast with the practice of previous Stability Programmes, when the Concertation Committee took note of the fiscal trajectory, all levels of government approved the overall fiscal trajectory presented in the 2018 Stability Programme and supported the achievement of the fiscal targets by 2020 for all government levels. Although this approval added credibility to the overall trajectory, there was no formal agreement on the annual fiscal targets at each level of government. A lack of agreement on the targets at each level of government may undermine the viability of the overall trajectory towards the medium-term objective. In addition, this prevents the public-sector borrowing requirements section of the High Council of Finance from effectively monitoring compliance with these targets. The 2019 Stability Programme contains only indicative overall and intermediary budgetary targets as elections took place at the federal level and at the level of the Regions and Communities on 26 May 2019.

                  (13)

                  Recent economic growth has resulted in jobs growth and employment is at the highest level in the past 10 years. Nevertheless, transitions from inactivity or unemployment to employment remain low and Belgium is not on track to achieving its Europe 2020 employment target of 73,2 %. Strong regional disparities in the labour market persist. Despite a steady decline over the last five years, youth unemployment is well above the Union’s average in Brussels. Labour market participation is low for the low-skilled, people with a migrant background, older workers and people with disabilities, suggesting that both structural and group-specific factors hinder their integration in the labour market, while existing activation measures are not equally effective for all population groups. The employment rate of older workers (55-64 years) remains below the Union average and the gap with the Union average remains high for those over 60 years. People with a migrant background, in particular women, continue to experience higher unemployment, lower activity rates, higher in-work poverty and over-qualification. While some measures have been taken to support the integration of new arrivals and to tackle discrimination, a coordinated approach to address the challenges faced by people with migrant background is still lacking. To address low labour market participation, measures have been taken as part of the ‘Jobs Deal’ reform, but their impact remains to be assessed.

                  (14)

                  Important financial disincentives to take up employment remain. Although the tax shift reduced the labour tax wedge, it remains on average high for all wage earners, except for the very low wage earners (50 % of the average wage). Belgium remains the only Member State in which unemployment benefits are not limited in time, though they gradually fall. There are financial disincentives for beneficiaries of sickness and disability schemes and second earners to take up full-time employment. In particular, single parents (and to a lesser extent couples with children) face limited financial incentives to take up (full-time) employment due to a combination of costs and withdrawal of benefits. Moreover, coordination problems may arise due to the split of responsibilities for the social protection between the federal, regional and local levels. The social security system does not formally cover the self-employed for unemployment benefits, accidents at work and occupational diseases.

                  (15)

                  The decline in educational performance within compulsory education and the existence of significant disparities in the education system remain a concern. The percentage of young people not mastering basic skills can be improved in particular in the French Community where that percentage is above the OECD average. The gap in educational outcomes due to socioeconomic and migration background is high. Teachers need more support to deal with diversity and there remains a need to adapt teachers’ continuous professional development. Reforms to improve educational outcomes and to tackle disparities need to be stepped up to boost knowledge-intensive, sustainable and inclusive growth and social inclusiveness. The implementation of the ‘Pact for Excellence’, the French Community’s flagship school reform to improve basic skills, efficiency, governance and tackle inequalities, is progressing. Decrees on the organization of work of teachers, on the common core school curriculum, on the status of school directors and the reinforcement of the knowledge of French for newcomer pupils have been adopted and will be applicable as from September 2020. The Flemish Community is implementing some reforms in secondary education as of 2019/2020, but early tracking of pupils remains a concern. The impact of these reforms and measures will also depend on their effective implementation and monitoring. The federal Parliament has also lowered the age of compulsory education from six to five years. Given the already high spending levels on education, reforms will need to be implemented with a stronger focus on increasing the efficiency and effectiveness of the system, and its capacity to deliver future-oriented and labour market relevant competences.

                  (16)

                  Skills mismatches and low job mobility hamper job and productivity growth. Despite several regional and federal measures taken to address skills shortages and increase activation, including as part of the ‘Jobs Deal’ reform, labour shortages are observed in several sectors, in particular in information and communication technologies, construction and health. The growth of the construction sector is held back by lack of skills and labour shortages. There are important needs in terms of re-skilling and upskilling the labour force in some sectors. Adult participation in education and training and job mobility are also low. Poor linguistic skills are an important issue, in particular in Brussels, where around 50 % of job offers require the knowledge of both French and Dutch, according to the 2019 National Reform Programme. Tertiary education attainment is high, but there are too few graduates in science, technology, engineering and mathematics (STEM). In 2016, Belgium ranked 26th in the Union for tertiary graduates in STEM education with a low rate of new entrants to related tertiary education fields, in particular for women. The overall implementation of the ‘STEM Action Plan 2012-2020’ in Flanders shows progress, but the number of STEM secondary graduates in technical and vocational paths has stagnated since 2010. The French Community has no STEM policy strategy and still needs to implement its recently adopted ‘Strategy for Digital Education’ for schools. Shortages of professionals with knowledge in entrepreneurship and in science, technology, engineering and mathematics hold back the development of start-ups. The overall level of digital skills is good, but not improving. The 2019 National Reform Programme highlights the agreement between Flanders and Wallonia and the planned agreement between Flanders and the Brussels-Capital Region to improve inter-regional labour mobility.

                  (17)

                  Research and development is concentrated in a few industries and there is insufficient diffusion of innovation to the rest of the economy, ultimately weighting on productivity growth. Publicly financed research appears to be below the Union average. In terms of Research, Development and Innovation, there are also regional and sub-regional disparities. The National Pact for Strategic Investment identifies the reinforcement of digitalisation as a promising avenue to boost productivity and the innovation capacity of Belgium. Doing so requires investments in digital infrastructure, including taking effective steps for the successful roll out of 5G, and human capital and entrepreneurial spirit as well as an accelerated take-up of digital technology, in particular by those firms that have been lagging behind so far.

                  (18)

                  The quality of road infrastructure is deteriorating after years of low public investment. At the same time, the maintenance of a large and dense network does not seem cost-effective for the regions and local authorities. Roads in Belgium are among the most congested in the Union. The rail infrastructure is dense and of good quality, but completing and upgrading it remains a challenge and there is congestion especially around Brussels and in access to the ports of Antwerp and Zeebrugge. Significant investments are planned in suburban rail infrastructure and signalling, but are being held back in particular by budgetary allocation rules across regions. Additionally, distortive incentives and barriers to competition and investment in domestic passenger railway services and intercity coach services constrain the supply and demand of alternative collective and low-carbon transport services. The increasing congestion is partly explained by the continuous increase of passenger cars, incentivised by toll-free roads, the company car deduction and low environmental taxation. High transaction taxes on immovable property and the company car scheme adversely affect mobility. The quality of rail services has decreased and the supply of urban and urban-rural public transport has room for improvement, in particular in Wallonia, where access to employment is a major constraint to jobseekers. According to the 2019 National Reform Programme, important investments and reforms are underway in all regions, while at federal level, and in cooperation with the Regions, the completion of the network of suburban railways around Brussels is progressing. Belgium adopted the law to open domestic railway services, but the share of passenger transport provided under public service obligations with a directly awarded contract remains very high in Belgium. Private bus operators are not allowed to operate intercity coach services. Taxi regulations vary among local authorities. Although regions have developed their own mobility plans, complex coordination prevents a consistent vision for mobility within Belgium, and possibly with border cities and regions. The Rail Regulator has room to develop the scope of its regulating activities.

                  (19)

                  There are substantial investment needs to support the energy transition. Renovation of the old building stock, which predates the introduction of energy norms, will help to meet the 2020 and 2030 emission reduction targets. The roll-out of alternative fuel is rather low. There is a need for major investment in power generation, as well as interconnection capacity, smart grids storage and energy efficiency.

                  (20)

                  In spite of government efforts, the regulatory and administrative burden on firms remains heavy and weighs on entrepreneurship. Taxation has been alleviated for start-ups and small companies, but remains complex for financial investments. Belgium has reformed its company law code, reducing the number of legal forms for companies, facilitating legal electronic communication, reducing minimum capital requirements and, according to the 2019 National reform Programme, reforming the insolvency law to include in particular liberal professions. However, in spite of these efforts, there are long delays for building permits, costly property registration and lengthy judicial proceedings. Administrative justice is experiencing challenges due to a lack of resources and lengthy proceedings, causing important delays, in particular for buidling permits, but also for procurement procedures. Moreover, coordination in climate, energy, digital and transport policy is complex and can be improved. Cooperation between customs authorities and market surveillance authorities is sub-optimal increasing the risk that non-compliant goods enter the Union through the Belgian borders. Impact assessment could be better integrated in the policy-making process. The quality of digital public services for businesses is low. The lack of digitalisation of the justice system remains a serious challenge, in particular for data collection. Completing the digitalisation of justice is an important condition for further improvements of the quality of the justice system, such as updating business processes and better management of human and financial resources at courts.

                  (21)

                  Barriers to competition and investment in several business services hamper growth and productivity. Entry rates of new service providers are significantly below the Union average, while profit rates are above the Union average. The Commission restrictiveness indicator shows that the Belgian regulatory framework for accountants, tax advisors, architects and real estate agents is considerably more restrictive than the Union average. A recently adopted law has introduced stricter requirements for patent agents. The Federal Planning Bureau estimates that an ambitious reduction of the regulatory burden in legal, accounting and architectural services would increase labour productivity. The regulated fees of notaries for real estate transactions are significant, adding to the high registration taxes. Regions have unevenly reformed the crafts and trade professions. The retail sector still faces operational restrictions that hinder its productivity and discourage investment. The supermarket sector displays a sub-optimal level of competition, mainly due to high concentration and low entry and exit dynamics. According to the Retail Restrictiveness Indicator, Belgium is the sixth most restrictive Member State as regards the operational environment for retailers. The 2019 National Reform Programme highlights recent reforms in the Brussels-Capital Region to facilitate retail establishment. The telecoms market is characterised by a high level of concentration (further accentuated by recent takeovers) and weak competition. This is also illustrated by relatively high prices for fixed services compared to peer countries. In fixed networks, the retail market is characterised by geographically defined duopolies of the incumbent and cable network operators. This may create obstacles to the provision of fixed-mobile convergent bundled services by some operators. The 2019 National Reform Programme highlights that the reform of economic law to improve compliance of competition law and the functioning of the Belgian Competition Authority by making procedures more efficient and reduce the risk of further disputes before the ‘Cour des Marchés/Marktenhof’ has been adopted. The Belgian competition authority has limited resources compared to the resources of competition authorities of other Member States.

                  (22)

                  The programming of Union funds for the period 2021-2027 could help address some of the gaps identified in the recommendations, in particular in the areas covered by Annex D to the 2019 country report. This would allow Belgium to make the best use of those funds in respect of the identified sectors, taking into account regional disparities.

                  (23)

                  In the context of the 2019 European Semester, the Commission has carried out a comprehensive analysis of Belgium’s economic policy and published it in the 2019 country report. It has also assessed the 2019 Stability Programme, the 2019 National Reform Programme and the follow-up given to the recommendations addressed to Belgium in previous years. The Commission has taken into account not only their relevance for sustainable fiscal and socioeconomic policy in Belgium, but also their compliance with Union rules and guidance, given the need to strengthen the Union’s overall economic governance by providing Union-level input into future national decisions.

                  (24)

                  In the light of this assessment, the Council has examined the 2019 Stability Programme and its opinion (8) is reflected in particular in recommendation (1) below,

            HEREBY RECOMMENDS that Belgium take action in 2019 and 2020 to:

         1.

            Ensure that the nominal growth rate of net primary government expenditure does not exceed 1,6 % in 2020, corresponding to an annual structural adjustment of 0,6 % of GDP. Use windfall gains to accelerate the reduction of the general government debt ratio. Continue reforms to ensure the fiscal sustainability of the long-term care and pension systems, including by limiting early exit possibilities from the labour market. Improve the composition and efficiency of public spending, in particular through spending reviews, and the coordination of fiscal policies by all levels of government to create room for public investment.

         2.

            Remove disincentives to work and strengthen the effectiveness of active labour market policies, in particular for the low-skilled, older workers and people with a migrant background. Improve the performance and inclusiveness of the education and training systems and address skills mismatches.

         3.

            Focus investment-related economic policy on sustainable transport, including upgrading rail infrastructure, the low carbon and energy transition and research and innovation, in particular in digitalisation, taking into account regional disparities. Tackle the growing mobility challenges, by reinforcing incentives and removing barriers to increase the supply and demand of collective and low emission transport.

         4.

            Reduce the regulatory and administrative burden to incentivise entrepreneurship and remove barriers to competition in services, particularly telecommunication, retail and professional services.

         Done at Brussels, 9 July 2019.

               For the Council

               The President

            M. LINTILÄ

         (1)  OJ L 209, 2.8.1997, p. 1.

         (2)  Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances (OJ L 306, 23.11.2011, p. 25).

         (3)  OJ C 136, 12.4.2019, p. 1.

         (4)  OJ C 320, 10.9.2018, p. 1.

         (5)  Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing Council Regulation (EC) No 1083/2006 (OJ L 347, 20.12.2013, p. 320).

         (6)  Cyclically-adjusted balance net of one-off and temporary measures, recalculated by the Commission using the commonly agreed methodology.

         (7)  Net primary government expenditure comprises total government expenditure excluding interest expenditure, expenditure on Union programmes fully matched by Union funds revenue and non-discretionary changes in unemployment benefit expenditure. Nationally financed gross fixed capital formation is smoothed over a four-year period. Discretionary revenue measures or revenue increases mandated by law are factored in. One-off measures on both the revenue and expenditure sides are netted out.

         (8)  Under Article 5(2) of Regulation (EC) No 1466/97.