Influencing and enforcement as parts of our supervision cycle
The AFM has a broad range of tasks that calls for clear choices and priorities. Our objective is to use our resources as effectively as possible and maintain an optimal balance between solving existing problems and preventing new ones from arising.
The areas of supervision for which the AFM is responsible are very different in nature. The differences concern not only our formal intervention measures. Capital markets, financial services, asset management and the accountancy sector are also quite different in terms of dynamics, players and level of maturity.
Influencing and enforcement are important aspect of our supervision cycle. The AFM's supervision aims to ensure compliance with financial legislation and regulations. The principle is that every market party should comply with these standards of its own volition. If a party does not comply, we have various instruments that we can use.
Our risk-based supervision cycle
The AFM influences the behaviour of market parties in every single step of the supervision cycle. For example, the mere hint that a particular risk has appeared on our radar is often enough to get them moving - for example when we ask them how they deal with a specific risk.
We exert the most targeted type of market influence in the third step of the supervision cycle, which includes formal enforcement. However, this phase also includes several instruments that we would characterise as ‘informal’. The difference between informal and formal enforcement instruments is that the latter have an explicit legal basis, while informal enforcement measures are not mentioned in the law.
This third step centres around a twofold question:
- What is the most effective and efficient way to influence the behaviour of companies under our supervision?
- And what is the most effective and suitable instrument we can use, in light of the available capacity and other resources?