Disagreements Arise at the EFRAG Board’s Proposed Voting Model
The European Supervisory Authorities also known as ESAs that include EBA, ESMA and EIOPA have raised serious concerns about the voting model in the new EFRAG board. They have recommended the enhancements of the role of the EU in promoting accounting standards of high quality. In case they obtain the individual rights in deciding on the endorsement advice regarding the new and revised IFRs on the EU commission, the ESAs have stated their intention to decline their membership offer that they have received.
The three bodies have expressed their concerns in a letter in the middle of discussions on the EFRAG reform whereby EFRAG is presently deliberating the reform’s implementation with the national standard setters with European nationals, the EFRAG member organizations for purposes of detailing the EU commission reformed structure.
In his report, it was suggested to have the current supervisory body replaced with a high level board that would approve the comment letters which were addressed to the board and also the advice letters on endorsement to the commission which relied on the technical group’s work. 16 members would comprise the board with four European public institutions, 5 stakeholders to represent the private interests and also seven other national standard setters. It is expected that the board will express one single view and the members would have the possibility of remaining silent or abstain in case they do not agree to the views of the majority.
The ESAs view that the proposed model of voting may lead to instances where the results of voting will not reflect the interest of the public since the private stake holders objectives or even the national standard setters are very unlikely to be aligned to the purposes of protecting the interest of the public. Therefore, they propose that it is only the public authorities who are represented in the board can make a decision regarding the advice on final endorsement to the European Commission.
In the letter, the ESAs have made a declaration that they can only join the new board as mere observers and will go on acting in the same way in case the concerns that they have raised are not addressed.