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Economic and monetary challenges - Review of EU regulations to support the financing of the EU economy and financial stability

ESMA: evaluating the regulatory reform in response to the financial crisis

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


As a response to the financial crisis the EU launched an ambitious and comprehensive reform agenda which has led to extensive work for ESMA in helping to build the single rulebook, by delivering technical advice on legislation to the EC, drafting technical standards and issuing guidelines on the application of EU law.

As the implementation of the reform agenda progresses, it is important to evaluate its results. As for any operation of this scale, and for the financial regulation this is on a scale without historical precedent, such assessment will identify areas for improvement. Therefore, ESMA takes an active interest in considering the impact of the regulatory reform implemented since the financial crisis.

Evaluating implemented legislation is already standard practice within the legislative cycle. In the past years we have provided the EC and the co-legislators with extensive evaluations of EMIR, SSR, CRAR and MiFID II/MiFIR. For the various pieces of sectoral legislation relevant for securitization we have run a comprehensive stocktaking exercise of due diligence, disclosure and retention requirements which led us to formulate recommendations to strengthen cross-sectoral consistency, promote non-duplicative requirements and avoid legal uncertainty. ESMA also made recommendations as part of the EMIR review to improve the reporting regime which should reduce associated costs for stakeholders.

In addition, ESMA monitors closely the impact of its own legal measures, through our supervisory activities and based on stakeholder experiences. We review our own Level 2 regulatory work where necessary, as we have done for example with our Regulatory and Implementing Technical Standards on reporting under EMIR. An important advantage of the Level 2 rule-making process is that, compared with the Level 1 process, it allows for a relatively rapid response if there is a need to amend existing rules. Rules can be adjusted more easily then directives or regulations although amending our technical standards does still require a substantial amount of time. Therefore, ESMA supports further exploring mechanisms to address making regulatory adjustments in a more flexible and agile manner. One example could be introducing the possibility to issue ‘no-action’ letters which take immediate decisions on regulatory requirements. Many other regulators have the powers to do so.

ESMA monitors closely the impact of its own legal measures major work is still ahead of us with a number of important reforms still due and a significant number of delegated and implementing acts still to be finalized.

Although the regulatory reform and its implementation are well underway, major work is still ahead of us with a number of important reforms still due and a significant number of delegated and implementing acts still to be finalized. This has two implications: first, the full impact of the regulatory reform cannot yet be assessed; second, evaluating, and possibly changing legislation which is still underway reduces predictability, creates uncertainty for stakeholders and may undermine the credibility of the regulatory reform.

I welcome the call for evidence by the EC to comprehensively assess the current regulatory framework. It is important to look at the cumulative impact of EU regulation on financial markets and its participants in order to identify shortcomings and loopholes, and to assess its performance, effectiveness and efficiency of the reform. This is all the more important when taking into account that financial markets are characterized by permanent change and innovation. However, the EU regulatory reform is broadly based on G20 commitments, agreed in response to a crisis which has had an unprecedented negative impact on our financial system. Hence, the call for evidence should not impact in any way on these commitments or reverse the general course of financial regulation.