Efforts to grant the European Securities and Markets Authority greater supervisory powers face resistance from some EU members, its chair Verena Ross told Reuters, underscoring the challenges in unifying Europe’s fragmented capital markets.
“It’s clear that when it comes to supervision and also some of the other measures, there’s not a unified view that is definitely the way to go,” said ESMA’s Ross.
“It’s quite hard to predict where we will come out,” she said in an interview in Paris, while remaining confident about broad support for the EU’s package of measures to harmonize financial markets.
The European Commission’s Savings and Investment Union (SIU) package is the latest iteration of plans to deepen capital markets across Europe, which have been discussed for a decade, but which have made little progress.
Announced in March, the SIU seeks to use trillions of euros in private savings held in bank accounts to fund technological and industrial development. As part of this initiative, ESMA could gain powers to directly oversee large cross-border financial firms, including crypto companies.
“I think we will have some debates around those areas. Rightly so. It’s important, I think, to have that debate openly and constructively,” Ross added.
Currently, Paris-based ESMA directly oversees rating agencies and central counterparties, as well as trade and securities repositories. While EU leaders have voiced support for strengthening ESMA, progress has been slow due to key EU members’ reluctance to give up control of their national financial rules.
The head of France’s financial regulator told Bloomberg in March that she would be willing to relinquish some national authority, while Luxembourg’s prime minister wrote in the Financial Times “a decentralised European supervisory system leverages national authorities’ expertise and avoids unnecessary bureaucracy.”
CRYPTO SUPERVISION
The rollout of the EU’s landmark crypto regulation, MiCA, has raised concerns about inconsistent approaches among national regulators and whether they can effectively supervise complex cross-border financial firms.
France’s financial regulator last month warned that ESMA’s lack of direct authority could lead to a “regulatory race to the bottom”. Regulators across the bloc are divided over the speed and rigour of other countries’ approvals.
Ross acknowledged that individual countries were moving at different speeds on MiCA due to varying levels of pre-existing crypto regulation.
But Ross added that “some have argued that rather than having 27 national supervisors responsible, let’s just make ESMA responsible for it,” a move that would make supervision more effective.
ESMA has also been warning about excessive leverage in parts of fund management, some of which remains opaque. The regulator plans to collect information from market participants to address any lack of transparency.
The regulator welcomed comparisons between ESMA and the U.S. Securities and Exchange Commission (SEC) but pointed out key differences.
“I always find it very flattering if people talk about the European SEC. I personally have not used this term,” Ross said.
“We are not the U.S. – Europe is different, and we are talking here about natural steps to potentially move some of the direct supervision responsibility to the EU level, but in a very narrow and selected way.”
(Reporting by Elisa Martinuzzi and Elizabeth Howcroft)
