The Lamfalussy process is in use in the European Union for the regulatory development of the financial services action plan (securities, banking and insurance). It is named the Lamfalussy process due to the former president of the advisory Committee, Alexandre Lamfalussy, who designed it in March 2001. It consists of four levels focuses, each of them, on a specific stage of the implementation of financial legislation.
The first level encompasses the Directives and Regulations approved by the European Parliament and Council about which ESMA may, occasionally, be requested to give technical assistance to the EC.
The second level is composed of Directives and Regulations issued by the European Commission. In that level, ESMA has an important role in drafting of technical standards that the EC will later approve as Regulations or Directives. These technical standards are of two types: first, regulatory and second, implementing technical standards. The regulatory technical standards refer to substantive content of the legislative requirement, whereas implementing technical standards are executive
s measures pertaining to those requirements such as standard forms, templates and general procedures.
At the third level, ESMA will develop guidelines and recommendations with a view to establishing consistent, efficient and effective supervisory practices and ensuring the common, uniform and consistent application of securities law in the EU. The guidelines and recommendations, although not binding, have been strengthened under ESMA. In this sense, the Competent Authorities must make every effort to comply with and will be required to offer explanations if they do not intend to. In addition, financial market participants can also be required to report publically whether they comply with the guidelines and recommendations or not.
At the fourth level, the purpose is to strengthen the enforcement and monitoring of European Regulation and, to that effect, ESMA could – after being requested to or on its own initiative - launch an enquiry and issue a recommendation addressed to the National Authority within two months of launching its investigation.
The Lamfalussy approach aims to obtain a consistent criteria for European Regulation, a higher convergence on national supervisory practices in the financial services sector and a an improved technical quality.