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Financing of the EU economy - Is the CMU on the right track?

CMU: working towards consistent supervisory outcomes

By Maijoor Steven - Chair, European Securities and Markets Authority (ESMA)


ESMA launched last year its Strategic Orientation for 2016-2020 which envisages a significant increase in the resources devoted to promoting supervisory convergence. Our aim is, over time, to increase the consistency of supervisory outcomes and to ensure that supervision is sound and effective across the EU, without regulatory arbitrage or a race to the bottom between Member States. For the CMU, increased focus on supervisory convergence should improve predictability for firms, and help foster the conditions for investor confidence in capital markets.

The Strategic Orientation also signalled the need to adapt our approach to future convergence work. We will aim to provide more systematic support for convergence ex ante, using a wider range of tools to better tailor our activities to the needs of national authorities. For example, we will be looking to make more use of briefings for supervisory staff and networks for sharing experience on live cases to share expertise and enable like cases to be dealt with consistently in different jurisdictions. This approach will allow us to make ex post review more targeted and effective, because the ex-ante work would have given us a sound understanding of the supervisory challenges and how to address them.

ESMA has also enhanced the governance around convergence work so as to enable us to identify priorities and ensure we deliver them. In February 2016 ESMA published its first Supervisory Convergence Work Programme, setting out priorities and the work programme envisaged for 2016.

Our first priority for 2016 is to support the effective and convergent implementation and supervision of the new MiFID 2/MiFIR and market abuse (MAR) legislation, and to deliver the significant IT projects needed to support that. In addition to the production of guidelines and Q&A to support the consistent application of the requirements, we will provide a range of training and workshops for national authorities.

Our second priority is the supervision of OTC derivatives markets and in particular of CCPs. With the clearing obligation due to come into effect it will become even more important that CCPs do not compete on risk. We continue our work to improve the effectiveness of colleges and will carry out a peer review this year on margin methodologies and collateral acceptability and valuation.

For the CMU, increased focus on supervisory convergence should improve predictability for firms, and help foster the conditions for investor confidence in capital markets.

Our third priority is initiating activities which, in addition to those above, support specific actions in the Commission’s Action Plan. We are undertaking a thematic study on home and host responsibilities under UCITS and AIFMD with a view to clarifying responsibilities and so enabling smoother operation of the passports for marketing and management. We will finalise a peer review on the authorisation of prospectuses and use the findings to promote increased convergence and to inform deliberations on new legislation.

We will not achieve everything in 2016, and planning for work in future years is already underway. In relation to CMU, we have identified several convergence themes which we will look to address in the period 2016-2020. These include looking at the authorisation process and potential barriers to or difficulties in the operation of the passport; targeted work is underway in both these areas. We will need to consider the effectiveness and consistency of enforcement across the EU, and of steps taken to deal with unauthorised activity. However, there will be challenges here arising from the fact that not all our national authorities have full responsibilities in these areas.

Finally, a successful CMU also requires in some cases a rapid response to market developments. For example, it could be beneficial to suspend a trading or clearing requirement in response to unexpected market developments. It could therefore be useful to develop a mechanism which would enable ESMA, subject to strict accountability, to allow specific legislative requirements to be waived or adapted, where this could be done without jeopardising investors, market integrity or financial stability.