Navigating the minefield of the ESA review

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Following a long, regulatory post-crisis process aiming at restoring confidence and formulating a Single Rulebook, the Commission has, with the ESA review, triggered further supervisory integration to ensure consistent implementation. In their assessment of this process in this ECMI Commentary, Fabrice Demarigny and Karel Lannoo find that it goes in the right direction, particularly in the context of forging a post-Brexit CMU, but that the proposal tries to kill too many birds with one stone. In their view, the governance of the ESAs should be better aligned with the level of integration that will result from more EU-wide supervisory action. This can be achieved by giving a say to permanent executive members in the Board of Supervisors on supervisory issues and by setting an ambitious selection process for the chairperson and executive board members going beyond mere administrative grades and processes.

As regards the new areas of direct supervision given to ESMA, apart from the current obvious cases (benchmarks, CCPs, ELTIFs and data providers), Demarigny and Lannoo argue that transfers to the EU level should be the result of a dynamic process following an assessment of the degree of market integration based on objective key indicators (the cross-border nature of the business, number of market players, standardisation of products, contagion risk, etc.) when product- or market-specific legislation is periodically evaluated. Finally, they assert that the ESAs’ relationships with third countries should be conceived as one of the components of a wide strategic thinking of what a post-Brexit CMU should be. So far, in their view, such vision is missing.

Fabrice Demarigny is Chairman of ECMI Board and Global Head of Financial Advisory Services and Capital Markets Activities at Mazars. Karel Lannno is General Manager of ECMI and CEO of CEPS.