25 EU countries backed the compromise drawn up by the Irish Presidency of the EU Council on Friday 9 October in Luxembourg. The ‘MISP’ legislative package aims to reform European financial market infrastructure and supervision (see EUROPE 13953/25). Belgium alone chose to abstain.
For the 26 Member States – including the Presidency – that backed the compromise, despite sometimes substantial reservations, an imperfect agreement is better than no agreement at all if the aim is to conclude the dossier with the European Parliament before the end of the year, in line with the ‘One Europe, One Market’ roadmap.
“Everybody loses a little bit, but we all win”, French Economy and Finance Minister Roland Lescure said after the Economic and Financial Affairs Council (Ecofin). “This is the ‘Draghi’ report in action”, he said approvingly.
Several Ministers still needed convincing on Thursday evening, particularly over the division of certain responsibilities between national and European supervisors, the time limits governing prior review of certain supervisory decisions within the European Securities and Markets Authority (ESMA), and the provisions on funding the European authority. This prompted Dublin to make last-minute adjustments.
The agreement in principle finally secured on Friday marked, according to Irish Minister Simon Harris, “a major step towards a more integrated Savings and Investments Union”, made possible by a “spirit of compromise” that was widely welcomed around the table.
Nevertheless, the general approach on which the EU27 now intends to formalise their official position has been watered down so extensively that it does not satisfy the European Commission.
“We deeply regret that the compromise now on the table falls significantly short of the level of ambition needed”, European Commissioner for Financial Services Maria Luis Albuquerque told Ministers, citing a considerable gap between the compromise and the Commission’s proposals on reforming ESMA’s governance and the range of entities subject to its supervision.
Belgium denounces an uneven playing field caused by restrictions on the ESMA’s scope. The Commission wants the ESMA to directly supervise major financial market infrastructures deemed “significant”.
The Irish compromise, however, sets significance criteria that would exclude four ‘trading venues’ from European supervision: – Germany’s platform Deutsche Börse; – the Tradegate Exchange (75% owned by Deutsche Börse); – the Compagnie Financière Tradition Group; – the Swiss Infrastructure and Exchange Group (SIX Group), which owns the ‘BME’ subsidiaries in Spain and Aquis Exchange.
“If our objective is to build a genuine capital market, the supervisory framework should strengthen convergence and integration and not create different supervisory regime for comparable market operators. Carve outs create fragmentation, distortion of competition and a lack of level playing field”, Belgian Minister Jan Jambon stressed. He said that his country’s Prime Minister, Bart De Wever, would raise the issue again at the European Council on 15 and 16 October.
The scope agreed by the Council of the EU also concerns the Commission with regard to crypto-asset service providers (‘CASPs’).
“The Commission had proposed that all crypto asset service providers because of their cross border nature by design would be under ESMA supervision. Under the current criteria we estimate that maybe 10 to 15 will actually fall under ESMA supervision out of close to 400 existing in Europe”, Ms Albuquerque told a small group of journalists, including Agence Europe, after the Ecofin meeting.
Commission deplores reduction in ESMA’s independence. The Commission believes the EU Council’s compromise leaves national supervisory authorities with too much influence over ESMA’s decisions, through the powers granted to the ‘Board of Supervisors’, made up of representatives of the national competent authorities, over a future permanent ‘Executive Board’.
“The Board of Supervisors has significant powers not only to ratify decisions by the Executive Board ex-post, but they can also do it ex ante, even before the Executive Board makes such decisions”, Ms Albuquerque lamented.
“And we feel that this is a way less efficient way of doing central supervision, less agile. It will be duplicative and in our view, it will also be costly and more complex”, the Commissioner continued.
And added: “With this proposal (...), our aim was precisely to establish a leaner, more efficient supervisory system, non duplicative and simpler overall”.
Interinstitutional negotiations could tip balance. The Commission is now counting on the European Parliament to adopt a position that matches the legislative proposal’s original ambitions. It hopes to achieve a better outcome in the forthcoming interinstitutional negotiations between the EU co-legislators.
The Parliament’s rapporteur on the ‘MISP’ package, Markus Ferber (EPP, German), said on Friday that he was convinced Parliament would adopt a “more ambitious” position.
“It is good and overdue that the EU Council is picking up speed. Europe needs integrated capital markets, and every month of stalemate costs competitiveness. I doubt, however, that the compromise is ambitious enough”, he said.
Parliament’s Committee on Economic and Monetary Affairs (ECON) will seek to establish its negotiating position in early December. (Original version in French by Bernard Denuit)