Where are we heading on the review of the ESAs?

ABBL Published 02.03.2018

Quite some water has flown down our local Mosel ever since the Commission presented its controversial proposal on the review of the European Supervisory authorities. The proposal stands in particular for more centralization of powers at EU level. For one in the area of governance the management board would be replaced with a much more powerful and very slim decision making Executive Board of 3-5 permanent members (high officials). This has largely been read as an exclusion of the perspective and experience of the local supervisors gathered in the Board of Supervisors. As dramatic a change is also the centralization of powers when it comes to the authorization of for example some investment funds and some listed prospectuses (e.g. third country issuers) as well as a final authorization at ESMA or EBA level regarding delegation / outsourcing to third countries.

After a first exchange of views in January, the European Parliament’s ECON committee held earlier this week a public hearing with recognized experts from abroad the spectrum. The only obvious missing stakeholder category was the industry who did not seem to have been invited. Nevertheless the hearing was very clear on two aspects: direct supervision by the ESAs of activities like investment funds and prospectuses was seen critically and the corporate governance model regarding the suggested Executive Board will probably not  go through in its current form. Leading MEPs also agreed to have a position to negotiate with the Council by the beginning of autumn aiming at the adoption of the reform before the end of the current legislature (Spring 2019). This has now been confirmed by the announced timeline.

In then Council – the second co-legislator – the increase of direct supervisory powers as well as centralization in a powerful Executive Board are also largely seen with skepticism if not openly with rejection. The pace of work is slow – some say deliberately slow. But then it is the right of the legislator to take the time it needs to analyze and amend a legislative proposal it is supposed to adopt in the end.

All in all, there seems to be quite some opposition to significant increases in the ESAs powers. Nevertheless what will remain in the end in the legislation and in what form is still rather fuzzy and to some degree unpredictable just as the timeline of the final adoption. The latter could be by the end of the year in an ambitious scenario or as well somewhere in late 2019 or even 2020.

By Antoine Kremer, Head of European Affairs – ABBL


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