The Lamfalussy Process

Solvency II is a ‘Lamfalussy Process’ directive. Originally developed in March 2001, The process is named after the chair of the EU advisory committee that created it, Baron Alexandre Lamfalussy. The process is designed to ensure that EU legislation in complex areas of financial services law is relevant for changing circumstances.

It is composed of four "levels," each focusing on a specific stage of the implementation of legislation.

Level 1 - framework legislation, voted on by the Council and Parliament
Level 2 - implementing measures for the Level 1 legislation, led by the Commission
Level 3 - supervisory committees facilitating the convergence of regulatory outcomes
Level 4 - enforcement of all EU measures, led by the Commission

Under the Lamfalussy arrangements, the Commission proposes framework legislation and it is adopted under the 'co-decision' procedure. This involves both the European Council and the European Parliament (Level 1).

It is supplemented at Level 2 by more detailed implementation measures, adopted by the Commission and endorsed by a qualified majority of Member States.

The detailed Level 2 legislation is prepared by the Commission, without having to go back through the co-decision process involving the Council and Parliament, as the Commission is acting within the parameters of the framework legislation.

The Commission will act on the basis of advice provided by representatives of national supervisory authorities, acting through the 'Level 3' committees (CEBS, CEIOPS and CESR). In finalising their advice, the Level 3 committees consult extensively with providers and users of financial services.

The Level 3 committees also aim to foster supervisory convergence and best practice, principally through the creation of (non legally binding) guidance. Finally, at Level 4, the Commission ensures that Member States are complying with applicable legislation and it pursues enforcement action where required.