Financial Services Ireland

Briefing

European Commission proposals to strengthen Capital Markets Union

On 20 September last, the Commission issued its long-awaited draft legislative package on strengthening the EU supervisory regime, embracing:

Imposing greater convergence authority by the ESA’s (European Supervisory Agencies) and day-to-day oversight over the national competent authorities.
Raising the statutory direct supervisory powers of ESMA over financial and FINTECH firms, and certain capital markets
Vesting powers with EIOPA in ultimately authorising the use of insurers internal models used in calculating their Solvency II capital requirements

The EU Commission proposes to grant ESMA with direct supervisory powers over certain areas of capital markets across the EU:

Capital market data: ESMA to authorise and supervise the EU’s critical benchmarks and endorse non-EU benchmarks for use in the EU.
Capital market entry: ESMA to accredit certain EU prospectuses and all 3rd Country prospectuses drawn up under EU rules.
Capital market actors: ESMA to authorise and supervise certain investment funds, notably European Venture Capital Funds, European Social Entrepreneurship Funds and European Long-Term Investment Funds.
Market abuse cases: ESMA to be vested with more powers in coordinating market abuse investigations. It will have the right to intervene where certain orders, transactions or behaviours give rise to well-founded suspicion and have cross-border implications or effects for the integrity of financial markets or financial stability in the EU.

Further, the EU Commission, in an effort to re-energise the Capital Markets Union, proposes new powers vested with the ESA’s in respect of:

The ESAs will be granted powers to integrate ESG and climate change risks into their mandates, as a means of promoting sustainable finance, while ensuring financial stability. Risk disclosure of ESG factors will be increasingly monitored by the ESA’s across banks, insurers and asset managers.

The ESAs will coordinate national FINTECH initiatives to promote innovation and strengthen cybersecurity.

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