On Friday 17 November, the President of the European Central Bank (ECB), Christine Lagarde, suggested extending the powers of the European Securities and Markets Authority (ESMA) to make it a true stock market watchdog at European Union level, similar to the US Securities and Exchange Commission (SEC), with the aim of stimulating the development of a capital markets union.
ESMA already directly supervises certain financial players such as rating agencies. “Supervision remains largely at the national level, which fragments the application of EU rules”, observed Ms Lagarde at the European Banking Congress in Frankfurt. In her view, “creating a European SEC, for example by extending the powers of ESMA, could be the answer” to the fragmentation of capital markets in the EU. With “a broad mandate, including direct supervision”, this European securities regulator would help “mitigate systemic risks posed by large cross-border firms and market infrastructures such as EU central counterparties”, she added.
The President of the ECB also described as “essential” a single body of European prudential rules for the financial markets, as was the case when the banking union was set up. Finally, she argued, a truly European capital market requires “consolidated market infrastructures” integrated within pan-European groups.
And Ms Lagarde added: “Research shows that stock markets that are part of wider groups perform better in terms of depth, IPO activity and liquidity, and this group effect proves to be particularly powerful for smaller exchanges”.
To see Ms Lagarde’s speech, go to https://aeur.eu/f/9ms (Original version in French by Mathieu Bion)