EU economy ministers agree to lower the ambition of Brussels' proposal to centralise capital market oversight in ESMA. The European Commission criticises the agreement as insufficient and warns of further fragmentation.
The economy ministers of the Twenty-Seven reached an agreement on Friday in Luxembourg regarding the EU capital markets integration package, which reduces the ambition of Brussels' original proposal. The final text, as reported by elespanol.com, dilutes the centralisation of oversight in the European Securities and Markets Authority (ESMA) and excludes operators such as Deutsche Börse and Bolsas y Mercados Españoles (BME) from direct control by the European authority.
The European Commission's initial proposal aimed for ESMA, based in Paris, to directly supervise major financial platforms and all crypto-asset providers. However, the Ecofin agreement tightens the criteria for determining which entities are considered significant and therefore fall under European supervision. As a result, four groups of trading platforms, three clearing houses, and two central securities depositories are excluded.
In the realm of crypto-assets, Brussels proposed transferring oversight of the entire sector to ESMA. Ecofin limits direct control to providers deemed significant entities for the EU economy, meaning only part of the sector will remain under centralised supervision.
The Commissioner for Financial Services, Maria Luís Albuquerque, has been very critical of the outcome. In a statement, she lamented that the compromise "falls far short of the necessary level of ambition" to achieve the goals of the integration and market oversight package.
"This reduction in ambitions sends the wrong signal. It disincentivises operators from achieving sufficient scale at the European level and reduces the concrete benefits that market participants and investors should derive from a more integrated oversight framework," Albuquerque stated.
The commissioner also questioned the governance outlined in the compromise, which allows for a prior debate in the Supervisory Board on decisions that fall under the Executive Board of ESMA, as well as reinforcing the role of national supervisors.
"Diluting ESMA's role to accommodate narrow national interests would not only weaken the effectiveness of oversight but also pose the risk of creating a costly and inadequate framework precisely when we need a credible European response the most," she demanded.
In contrast, the First Vice President of the Government and Minister of Economy, Carlos Cuerpo, celebrated the agreement, which was previously negotiated among the six largest European economies (France, Germany, Italy, Spain, Poland, and the Netherlands).
"We would have liked more ambition in some aspects, but we understand the need for compromise, for agreement. And we also understand that it is an important step and in the right direction," Cuerpo said.
The agreement has received support from countries that have traditionally opposed centralising oversight, such as Ireland and Luxembourg. The EU has over 300 trading platforms, 14 clearing houses, and 32 central securities depositories, seven of which are managed by central banks or other public entities. In the United States, there are only two central depositories and eight clearing houses. The market capitalisation of EU exchanges is equivalent to 73% of GDP, compared to 270% in the United States, and in the last decade, the number of IPOs in the United States has been more than triple that in the EU.
The European Commission hopes that the European Parliament will raise the level of ambition during the final phase of negotiations, which will resume in the coming weeks.
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