After more than a decade trying to knock down national barriers and boost private financing, EU countries signed off on a redesign of market oversight. Meeting in Luxembourg on Friday, finance ministers backed the Markets Integration and Supervision Package, or MISP, which would concentrate supervision and enforcement at the European Securities and Markets Authority in Paris. The push is part of building a real capital markets union to unlock funding and lift Europe's ailing competitiveness.
As the country currently presiding over the EU's rotating chair, Ireland tabled a compromise aimed at resolving which entities qualify as "significant" for direct ESMA supervision and which would be carved out. A small group of large infrastructures sit outside the net, with Germany's Deutsche Boerse named as the most obvious example. Governments also debated how powerful a new executive board should be to run ESMA's operations, and how a stronger ESMA would be funded. Ministers chewed over the latest tweaks at a dinner the night before Friday's public session.
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Some capitals, including France, and the European Commission initially questioned the compromise, according to people familiar with the talks. Financial Services Commissioner Maria Luís Albuquerque warned ministers that the deal weakens the supervisor's governance, brings "unnecessary complexity" and undercuts effective oversight, making ESMA "costly and cumbersome." "The European Commission cannot support this approach," she said, noting her expectation that the European Parliament will propose a more ambitious plan. Later, she told reporters it was "a way less efficient way of doing central supervision, less agile, it will be duplicative and in our view it will be costly and more complex." On scope, she noted "some significant trading and post-trading infrastructures which are scoped out - Deutsche Boerse is the most obvious example."
France's Roland Lescure indicated backing for the package as revised on governance, saying, "The EU is a game of 27 that often last more than 90 minutes but at the end Europe wins, with one condition: we need a good captain." He also called it "an ambitious text."
This package aims to make cross border capital flows smoother and financing easier to tap, but it is not final. Governments still need to clinch an agreement with the European Parliament in the months ahead before ratification, so ESMA's final powers, governance and funding could shift. Market players are urging momentum. "Europe cannot afford to lose momentum on capital markets integration," said Adam Farkas, CEO of the Association for Financial Markets in Europe. "At a time when Europe is looking to boost growth, competitiveness and investment, maintaining ambition on capital markets integration is more important than ever."
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