Alea jacta est! The dice is cast. After three rounds of secret ballot voting, a tie and a draw of lots at the most recent meeting of the General Affairs Council, the European Banking Authority goes to Paris. Even insiders were stunned. But with hindsight, was it that unpredictable?
Indeed you could write off Paris and Frankfurt as they both have already the European Securities Markets Authority (ESMA) respectively the European Insurance and Occupational Pensions Authority (EIOPA). Surely by secret ballot and each having the same voting rights, the small and medium sized Member States would not give the EBA to one of these two European giants that already have a big share of the ESA cake. But this is not counting with active lobbying strategies behind the scenes and the European ambition of the current French President.
Clearly the top of the French political elite has warmed to the financial center at the Seine and made it a political priority. But it is more than that.
Politically, after Emmanuel Macron’s Sorbonne speech it is another demonstration that France means to actively shape the future of the European Union and that Paris clearly sees itself at the heart of the integration project.
Strategically, putting the EBA next to ESMA is also a change of course for the European Supervisory Agencies and a centralization move towards Paris. Indeed the question of merging ESMA with the EBA is on the table again. In its 2010 reports on the creation of the ESAs, the European Parliament was at the origin of Article 81 of the EBA regulation that the Commission has the obligation to produce every three years a review of the founding regulations and a.o. analyse whether the authorities should not be merged into one. This has for quite some time not seemed politically feasible. With the EBA moving to Paris, the question has over night become the elephant in the room. Brussels rumours already have it that both ESMA and EBA are looking for a common building to house their offices…
Another consequence is that since Frankfurt didn’t win this race, a possible merger between the SSM / ECB and the EBA now seems very remote. This is to be welcomed as it strengthens the case for a strict separation between the ESAs’ rule making and convergence role on the one hand and the ECB’s supervisory function on the other. This logic now needs to be pushed to the end in the ESA review that is currently on the table.
By Antoine Kremer, ABBL & ALFI Head of European Affairs, Brussels