According to case law of the Court of Justice a direct and specific connection of an activity to the exercise of official authority is established if the activity is not just auxiliary or preparatory to its exercise and contains discretionary decision-making powers in contentious cases, powers of constraint or powers of coercion.

In cases where the relevant legislative act of the Union confers discretion on Member States, decisions taken by an ESA should not replace the exercise of discretion by the national supervisory authorities, where that exercise is in accordance with Union law.

In cases where the relevant legal act of the Union confers discretion on Member States, decisions taken by an ESA should not replace the exercise of discretion by the supervisory authorities in compliance with Union law.

In cases where the relevant Union legislation confers discretion on Member States, decisions taken by the European Supervisory Authority should not replace the exercise of discretion by the competent authorities in compliance with Union law.

In connection with the exercise of implementing powers, Article 202 strikes a subtle balance between the Council and the Commission, a balance which makes the Commission the implementing authority under the ordinary law, whilst keeping its power subordinate to that of the Council, which can both impose ‘requirements’ in respect of the exercise of the implementing power which it ‘[confers] on the Commission’ and, ‘in specific cases’, reserve the right to exercise those powers ...[+++] itself.

However, certain additional provisions were considered appropriate to reinforce supervisors' ability to monitor the entities coming within their supervisory remit, i.e.: (1) the addition to the list of authorization conditions of a further condition under which any group of which the credit institution, insurance undertaking or investment firm is a member must be transparent i.e. must be such as to permit effective supervision of the entity on an individual basis; (2) an additional requirement whereby credit institutions and insurance undertakings must maintain their head offices in the same Member States as the registered office as otherwise effective supervision by the home Member State competent authorities would be made more difficult ...[+++](this has already been laid down for investment firms); (3) a widening of the list of bodies with whom confidential supervisory information can be exchanged by the competent authorities; (4) the imposition on auditors of an obligation to report to the competent authority where in the carrying out of their function asstatutory auditors of the financial undertaking concerned irregular circumstances become known to them which might be detrimental either to the customers of the institution, to the financial system or to the soundness of the financial undertaking itself.