Method for producing European financial law in four levels, placing principles in a directive and technical detail in delegated acts amendable without returning to the legislature.
A financial text holding all its technical detail would be obsolete before entering into force, and correcting a single coefficient would require a full multiyear legislative procedure. The process designed by the committee chaired by Alexandre Lamfalussy solves this by layering. Level one is the legislative text, directive or regulation, adopted by Parliament and Council: it carries principles and empowerments. Level two gathers the Commission's delegated and implementing acts, which carry the numerical detail, and that is where most of what a practitioner applies actually lives. Level three gathers guidelines and recommendations from the European supervisory authorities, meant to harmonize supervisory practice. Level four is the Commission's oversight of effective application by member states. The practical consequence is decisive for anyone hunting a rule: the Solvency II directive runs to a few hundred articles, and the delegated regulation completing it holds more than seven hundred, correlation matrices and shock parameters included. Looking for a coefficient in level one is wasted time.
The report of the committee of wise men chaired by Alexandre Lamfalussy was delivered in February 2001 for securities markets, and the method was then extended across the financial sector. For Solvency II, level one is Directive 2009/138/EC, level two is Delegated Regulation (EU) 2015/35, and level three is the European insurance authority's guidelines. The equity shock or the correlation coefficient between modules is read at level two, never at level one.
niveaux 1 2 3 4, architecture Lamfalussy, actes délégués, niveau 2, regulatory pyramid