In an article in this space in January I had pointed out that the end of the parliamentary activities was nearing and that the Council was yet far away from a negotiating position on anything else than the AML part of the ESA review. It would have been sensible to go for the low hanging fruit i.e. an inter-institutional deal on the new EBA powers regarding the fight against money laundering. In the end the Commission as well as some Member States pushed for a grand gamble to force negotiations which ultimately paid off with an agreement among the legislators on the whole package last Thursday 21 March. The price to pay was a significant watering down of the Commission proposal.
The final text is not out yet. Nevertheless, the general lines of the result seem to be clear.
While the Commission had initially sought to gain for the European Securities Markets Authority (ESMA) direct supervision powers in a number of areas, it ended up with only EU critical and third country benchmarks. Importantly the supervision of wholesale as well as third country issuer prospectuses stays with the national competent authorities. The same holds true in the investment funds area for ELTIFs, EuSEFs and EuVECAs as well as for third country trading venues.
On the governance side the initial legislative proposal included the creation of a strong Executive Board run and staffed mainly by EU civil servants. In the end the existing Management Board is kept with six high level members from the national competent authorities as well as the ESA chair. The Management’s Board’s powers have also been kept more limited compared to the extremely ambitious initial proposal.
In its original legislative proposal, the Commission had also suggested to give to the ESAs de facto the last word on “substantial” outsourcing or delegation to third countries. In the final outcome the whole article has been scrapped and replaced by the option for the Management Board to set up coordination groups on any relevant topic and independent of the specific delegation / outsourcing issue.
In the fight against money-laundering the role of the European Banking Authority has nevertheless been strengthened. AML has been added to EBA’s scope of action. The European authority is to become a platform of exchange of information between national competent authorities.
The review is no big bang. Such primal birth giving events happen extremely rarely in the European Union. It is nevertheless a further step in a more general movement of integration of European banking and financial markets and their supervision. It is unlikely to be the last.
At the time of writing, final technical negotiations are still ongoing, and the text is to be finalized very shortly. Currently the Council is expected to confirm the agreement possibly already on 3rd of April while the European Parliament is to do the same at committee level on 1st of April and in plenary during the 15th-19th of April session. The formal adoption will nevertheless have to wait until the summer when the new European Parliament is to reconvene and approve the final text after the jurist-linguist legal clean-up and the Council to ultimately adopt the legislation.
By Antoine Kremer, ABBL & ALFI Head of European Affairs