EU compromise narrows proposed ESMA market supervision
EU finance ministers agreed on October 9 to a narrower plan for shifting oversight of some major financial-market operators to the European Securities and Markets Authority (ESMA). The compromise would give the EU regulator direct supervision of selected cross-border trading and post-trading firms and some crypto-asset providers, while retaining roles for national supervisors.
The agreement, reached at a ministers’ meeting in Luxembourg, is a political agreement on key elements of the Council of the European Union’s negotiating position for the Market Integration and Supervision Package. It is not legislation, and supervisory powers have not transferred.
Fewer firms would qualify for direct oversight
The compromise scales back the group of firms expected to come under ESMA compared with the European Commission’s original proposal. Reuters reported that the planned group would exclude three of nine central counterparties, which help complete trades, and reduce the number of central securities depositories under direct supervision from 15 to 13.
For crypto, Reuters reported that about 10 to 15 of roughly 360 EU crypto-asset service providers would fall under ESMA oversight. The proposed criteria would determine which operators qualify. The Commission would review the criteria for trading venues after two years.
The plan would also create a voluntary framework for eligible market operators that do not meet the direct-supervision criteria. Under that framework, an operator could run multiple venues across the EU under one licence and ESMA supervision.
The proposed shift matters because it would move direct oversight of some financial-market infrastructure from national authorities to an EU-level regulator. But the agreement sets out a possible future arrangement, not an immediate change for firms or their supervisors.
New ESMA board, with national supervisors still involved
The Council’s position would create a full-time ESMA executive board of six people: a chair and five independent members. A separate board of supervisors would remain ESMA’s principal body for regulatory decisions, strategy, budget and supervisory convergence.
During a two-year transition, ESMA-led teams of EU and national experts would work together, according to the Council’s plan. The proposal also provides for continued cooperation with national authorities. National supervisors would therefore retain roles even as ESMA took direct responsibility for firms meeting the proposed criteria.
The package reaches beyond market infrastructure. It includes targeted simplification for asset-management groups operating across EU countries, an optional depositary-passport regime that member states could make available, and an expanded pilot regime for testing financial-market applications of distributed-ledger technology.
The Council and the Irish Presidency have presented the package as a way to reduce fragmentation and barriers to cross-border financial activity. Those are stated aims of the proposal, not established effects of the ministers’ agreement.
Formal adoption and Parliament talks remain ahead
European Commissioner for Financial Services Maria Luís Albuquerque criticized the compromise as falling short of the Commission’s ambition, particularly on ESMA’s governance and which firms would be directly supervised, according to Agence Europe and EU News.
The Council must finalize its negotiating position before formally adopting it. Negotiations with the European Parliament can begin after Parliament adopts its own position. The eventual rules, including the final scope of direct supervision, remain subject to that legislative process.
Sources
- EU ministers reach watered down compromise on centralised cap markets supervision, Reuters, republished by MarketScreener
- EU countries agree to shift oversight of major financial markets to European authority ESMA, Euronews, with AFP
- EU Member States reach political compromise on ‘MISP’ package by scaling back European Commission’s original ambitions, Agence Europe
- Financial markets: Ecofin curbs ESMA’s supervisory powers, drawing criticism from the European Commission and the ECB, EU News
- www.consilium.europa.eu
- www.consilium.europa.eu
- irish-presidency.consilium.europa.eu
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