Head of ESMA points to limits of regulation
The harmonization of capital markets is one of the EU's oldest financial projects. At Börsen-Zeitung's Financial Market Day, the Chairwoman of the European Securities and Markets Authority (ESMA), Verena Ross, shed light on the topic from more than just a supervisory perspective. The discussion is always political as well, and only recently the French Minister of Economy and Finance expressed his displeasure with the process. „I have spent more than six years trying to build a capital markets union. I have come to the conclusion that it makes no sense to start with the 27 member states,“ said Bruno Le Maire.
Great sense of urgency
Ross, who helped set up ESMA and is involved in its implementation in many areas, is aware of the fatigue surrounding the topic. However, she also acknowledges the pressure on the EU to act. „It is clear, for example, that the banking union is unfinished and that the European capital markets are lagging behind the global markets in many respects.“ Ross says that the markets are underdeveloped.
Ross also believes that issues such as digitalization, decarbonization, and demographics require the mobilization of private and public capital on an unprecedented scale. „Without functioning capital markets, we will never have the resources,“ she says. At the same time, the head of the authority complains that the EU capital markets are still very fragmented and that there are many national special forms.
EU capital markets falling behind
There are many worrying key figures regarding the European capital markets, reports Ross. 2023 was the worst year for IPOs since 2013. This is also due to the fact that many companies prefer a listing in the USA.
Politicians, regulators and market participants are called upon to push ahead with the Capital Markets Union. At the same time, the measures adopted in the latest package need to be implemented. There are still many points to work through. And ESMA is largely affected by this.
The ESAP data interface must be made operational, the consolidated tape must be prepared and the next phase should begin in 2025 with a tender for a bond ticker. The new rules for Ucits and AIFM funds need to be implemented and dozens of technical measures are on the agenda for EMIR.
Proximity to clients remains important
In Ross' view, however, regulation does not solve all the problems of the EU capital market. She is therefore critical of the trend towards more and more laws and regulations. This is not enough, cross-border solutions must also be considered. On the other hand, national supervision will continue to play an important role. Proximity to clients is important.
The head of ESMA is in favor of a principles-based approach to regulation that is less detailed and provides more guidelines and greater flexibility for market participants. In any case, the aim is to tackle the fragmentation of the capital markets, which includes not only market regulation, but also the harmonization of insolvency law and taxation.
The EU's economics and finance ministers will meet in Brussels next week as part of the Eurogroup. The capital markets union is likely to be at the top of the agenda. Ross would like to see a uniform approach.
