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having regard to the final annual accounts of the European Banking Authority for the financial year 2011,

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having regard to the Court of Auditors’ report on the annual accounts of the European Banking Authority for the financial year 2011, together with the Authority’s replies (1),

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having regard to the Council’s recommendation of 12 February 2013 (05753/2013 – C7-0041/2013),

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having regard to Article 319 of the Treaty on the Functioning of the European Union,

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having regard to Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (2), and in particular Article 185 thereof,

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having regard to Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002 (3), and in particular Article 208 thereof,

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having regard to Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC (4), and in particular Article 64 thereof,

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having regard to Commission Regulation (EC, Euratom) No 2343/2002 of 19 November 2002 on the framework Financial Regulation for the bodies referred to in Article 185 of Council Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities (5), and in particular Article 94 thereof,

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having regard to Rule 77 of, and Annex VI to, its Rules of Procedure,

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having regard to the report of the Committee on Budgetary Control and the opinion of the Committee on Economic and Monetary Affairs (A7-0113/2013),

A.

whereas the Court of Auditors stated that it has obtained reasonable assurances that the annual accounts of the European Banking Authority (‘the Authority’) for the financial year 2011 are reliable and that the underlying transactions are legal and regular,

B.

whereas the Authority, a newly created Agency which is located in London, was established by Regulation (EU) No 1093/2010 and officially started its operations on 1 January 2011 as an independent authority,

C.

whereas the Authority should be considered in the context of its legal transition from its predecessor, the Committee of European Banking Supervisors (CEBS), and as a result, apart from its new mandate, it has taken over all existing and ongoing tasks and responsibilities from the CEBS,

D.

whereas the Authority is an integral part of the European System of Financial Supervisors and works in close cooperation with its sister authorities, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority, within a Joint Committee, and with the European Systemic Risks Board,

E.

whereas the Authority’s overall budget for 2011 was EUR 12 685 000,

F.

whereas in accordance with its Founding Regulation (6), 60 % of the 2011 budget was financed by contributions from the Member States and the European Free Trade Association (EFTA) countries and 40 % was financed by the Union budget,

G.

whereas at the end of 2011, the Authority recorded a positive budget outturn of EUR 3 579 861 (7), which was then recorded in the accounts as a liability towards the Commission,

1.

Takes note from the annual accounts (8) that the initial Union contribution to the Authority’s budget for 2011 was EUR 5 073 000; notes that this was the first year of the Authority’s activities;

2.

Acknowledges from the annual accounts that the Authority’s overall budget for 2011 amounted to EUR 12 865 000 (including a contribution of EUR 7 413 000 from national supervisory authorities and a contribution of EUR 199 000 from observers);

3.

Calls on the Commission to evaluate the possibility of coming up with a proposal ensuring that the budgets of the three European Supervisory Authorities (ESAs) are fully funded by the Union budget;

4.

Notes with concern that the provisions of the Financial Regulation are not fully adapted to the Authority’s financing scheme as 60 % of its budget is financed by contributions from Member States and EFTA countries; believes that that issue should be addressed, at the latest, in the course of the next revision of the Financial Regulation as regards agencies, and calls on the Commission evaluate this situation and to report on this issue to the discharge authority;

5.

Notes from the annual accounts that in 2011, the major focus of the Authority was its establishment and further extension;

6.

Stresses the importance of adequately matching the allocated budget and available posts on one hand and the tasks entrusted to the Authority on the other hand, as a mismatch may result in unbalanced staffing as regards the recruitment of the Authority’s staff on one hand and the involvement of national experts on the other; expresses concern about the fact that the Commission has altered the establishment plan, as proposed by the Authority without clearly indicating this; urges the Commission to be fully transparent on this and other issues;

7.

Notes the concerns that were raised in the preliminary conclusions of the IMF financial sector assessment of December 2012 on the Union in which it is recommended to increase the resources and powers of the ESAs in order to enable them to successfully fulfil their mandates, while enhancing their operational independence;

8.

Acknowledges from the annual accounts that in its inauguration meeting on 12 January 2011, the Authority’s Management Board adopted and approved the principal financial rules and the Authority’s Financial Regulation in order to enable it to execute its powers as a European authority;

9.

Notes that the two rented offices, with a total area of 1 089 m2, incurred expenditure of EUR 1 016 512,64 and calls on the Authority to ensure that office rentals and expenditure do not exceed normal local market prices and also to seek to reduce costs year on year as market conditions improve;

10.

Takes note from the annual accounts (9) that the standard and general budget structure adopted by the Authority at the beginning of 2011 needed to be adapted according to its needs (as the budget was prepared before the first year of the activity, there was no previous experience available);

11.

Observes from the annual accounts that on 10 June 2011, the Authority introduced accrual based accounting (ABAC), the accounting system used by the Commission for budgetary accounting; notes, furthermore, that during the transition period from 1 January to 10 June 2011, the Authority used an Excel-based tool for its budgetary accounting and at the time of transition, a report with commitments and payments loaded in ABAC was drawn up;

12.

Takes note of the fact that payments made prior to the implementation of ABAC are only reflected in the transition system and not reflected in ABAC; notes that each time a report on budgetary consumption and execution is tracked from ABAC, a manual aggregation is made in an Excel spreadsheet to fully reflect the initial budget and the consumption of commitments and payments for the entire financial year;

13.

Acknowledges from the annual accounts that from 2012 onwards, all financial transactions are fully represented in ABAC;

14.

Observes from the annual accounts that for general accounting, the Authority implemented SAP on 10 June 2011, a system directly linked to ABAC which is the system used by the Commission; notes, furthermore, that until this date, the Authority used SAGE (10), the system established by CEBS, for financial accounting, and that as of 10 June 2011 a transition balance was established;

15.

Notes that on 28 August 2011, the Authority established the asset registration system of the Commission (ABAC Assets) in order physically to track the individual items of the fixed assets (ABAC Assets is integrated in the Authority’s accounting system); notes, furthermore, that no system existed for that purpose in CEBS;

16.

Observes from the annual accounts (11) that during the months of August and September 2011, the Authority proceeded with a physical inventory of the fixed assets received from CEBS and concluded that no significant variances have been identified;

17.

Welcomes the validation of the Authority’s accounting system carried out by the external auditor, Deloitte Consulting (12); notes that the review of the Authority’s accounting system took place in November 2012;

18.

Observes from Deloitte’s report that ‘on the basis of the compliance validation procedures performed, Deloitte overall conclusion is that EBA accounting system is compliant with the criteria specified by the European Commission (DG Budget). A number of internal controls are already in place and are adequately executed by the EBA responsible for the accounting process, and for granting access to the key involved IT infrastructure elements, in line with good practices’;

19.

Observes from the annual accounts that the Authority registered a budget execution ratio of 71 % for commitments and of 59 % for payments at the end of 2011;

20.

Notes that the commitment execution rate for Title I (Staff expenditure) is 91 % and is in line with the number of positions filled on 31 December 2011 (41 out of 46 foreseen in the establishment plan); also notes that the lower rate in terms of payments (83 %) is mainly due to late invoicing of the seconded staff by national supervisory authorities; calls on the Authority to inform the discharge authority of the actions taken to address this deficiency;

21.

Observes from the annual accounts that the lower level of execution in Title III (Operational expenditure) relates mainly to the information technology (IT) area, which is explained by both a longer than expected recruitment of the necessary IT staff and length in the procurement procedure; calls on the Authority to inform the discharge authority of the actions taken to improve the level of execution in Title III;

22.

Observes from the Authority’s Annual Report (13) that in 2011, it used only non-differentiated appropriations; also notes that commitments amounted to EUR 9 054 030 or 71 % of the 2011 budget, of which EUR 7 436 217 has been paid and EUR 1 617 813 was automatically carried over, as per Article 10 of the Authority’s Financial Regulation;

23.

Notes with concern the observation by the Court of Auditors that the commitments rates were low, especially for Title II (Administrative expenditure) (57 %) and Title III (Operational expenditure) (46 %), which impacted on the Authority’s IT objectives, which were not entirely achieved; calls on the Authority to inform the discharge authority of the measures taken to improve these rates, as the low execution rates shows difficulties in budget planning and implementation;

24.

Notes that the Court of Auditors pointed out weaknesses as regards three legal commitments made in advance of budget commitments (EUR 742 000); calls on the Authority to inform the discharge authority of the actions it has taken to address this deficiency;

25.

Notes that according to the Authority’s Annual Report (14), in 2011, a number of procurement procedures for goods and services were initiated; notes, furthermore, that the Authority has made use of existing Commission framework contracts, especially in the IT area where it deployed a number of internal IT systems, such as e-mail and intranet, as well as an IT platform for collecting and analysing data from national supervisory authorities;

26.

Acknowledges that the Authority has made significant progress in updating its procurement procedures so as to comply with Union procurement rules; notes that the backlog of outstanding procurement procedures was substantially reduced and that according to the Authority, the remaining backlog/areas of non-compliance will be corrected in 2013; calls on the Authority to follow up this issue and to report to the discharge authority on the progress achieved;

27.

Acknowledges that some exceptions to the procurement rules were granted; notes, however, that the number was much lower in 2012 than in 2011 and that most areas of significant non-compliance have been corrected; calls on the Authority to inform the discharge authority of any further actions taken to address this deficiency;

28.

Takes note from the Court of Auditors that the Authority needs to improve the transparency of recruitment procedures; urges the Authority to inform the discharge authority of the actions it has taken to address this deficiency; considers that some of the provisions of the Staff Regulations may present a considerable administrative burden; therefore encourages the Commission to allow for a certain degree of simplification under Article 110 of the Staff Regulations in regard to the agencies;

29.

Observes from the Authority’s Annual Report (15) that 2011 was a crucial year for the Authority in setting up and extending the human resources team in order to adequately source its new functions and tasks; also notes that 33 recruitment procedures have been conducted in total, and that the Authority’s staff increased from 31 to 52 between 1 January and 31 December 2011 and is comprised of 19 nationalities;

30.

Refers, in respect of the other observations accompanying its Decision on discharge, which are of a horizontal nature, to its Resolution of 17 April 2013 (16) on the performance, financial management and control of the agencies.