EU finance chiefs reach preliminary deal on markets supervision

The package aimed at reducing national barriers that impede the flow of capital in the bloc must still be agreed with the European Parliament before ratification.

Finance minister Simon Harris hailed the deal as 'a major step forward for a deepened savings and investments union'. Picture: Clodagh Kilcoyne/PA

European Union member states reached a deal to revamp of market supervision after a decade-long effort to reduce national barriers and spur private financing.

Finance ministers in Luxembourg today agreed on the so-called Markets Integration and Supervision Package, or MISP, that will centralise supervision and enforcement under the Paris-based European Securities and Markets Authority.

Ireland, which currently holds the EU's rotating presidency, put forward a compromise proposal to bridge differences over deciding which “significant” institutions should fall under direct supervision of ESMA and what entities were exempted, including a handful of large ones, including Germany’s Deutsche Borse.

Countries were also haggling over how much power to give a new executive board that will oversee ESMA’s operations, and how a more powerful ESMA should be funded.

Ministers discussed the latest changes over dinner on the eve of a public debate today. The package must still be agreed with the European Parliament over the next months before ratification.

The new compromise was initially questioned by some member states, including France, and also by the European Commission, the people added on condition of anonymity because the discussions are private.

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Financial services commissioner Maria Luís Albuquerque told ministers today that the compromise weakens the governance of the financial markets regulator, introduces “unnecessary complexity”, and undermines the effectiveness of supervision, making ESMA “costly and cumbersome”.

“The European Commission cannot support this approach,” she said in the debate, adding that she hopes that the European Parliament will put forward a more ambitious proposal.

In briefing notes for today’s meeting, Ireland had said the compromise text “maintains the bulk of the commission’s proposal and delivers on the core objectives while reflecting significant negotiations and trade-offs”. 

“The text should be viewed as a package, and securing political agreement on the package is a significant step for EU financial markets,” the note adds.

Recalling a saying about Germany and football, France’s Roland Lescure said during today's discussion that the “EU is a game of 27 that often last more than 90 minutes, but at the end Europe wins, with one condition: We need a good captain”. 

“It’s an ambitious text,” he added, signalling support for the measure with the amended governance structure.

The MISP package was put forward to spearhead efforts to build a true capital markets union in Europe, aiming to unlock financing to boost Europe’s ailing competitiveness. EU member states have struggled for over a decade to reduce national barriers that impede the free flow of capital in the bloc.

Speaking on his way into the meeting, finance minister Simon Harris said Europe has the savings, and now it is time to put them to work. 

"Today’s agreement is a major step forward for a deepened savings and investments union, with significant added value for the EU’s longer-term competitiveness," he said. 

"This package will help to unlock the full potential of the single market for financial services, allowing EU citizens and businesses alike to tap into well-integrated and more efficient capital markets."

Bloomberg